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TAXES!!! What should I do?

T

TheSiege

Diamond Member
My ex doest make much, maybe 30k, at most. I make a lot more than here. Normally she claims one child and I claim the other. She is single. I am married. I am wondering if this year claiming both kids would be more beneficial for me since I know she is taking the standard deduction. My wife is also in the same situation. She has 1 kid, who is my step daughter. Her ex makes maybe 50k a year and is single. I am wondering if we should claim her daughter as well. I know our exs would have to agree to this, but if doesnt benefit them any and it does us, we could split the difference. I am not sure if I am going to itemize. I have a rental property and only paid 9900 in mortgage interest on my primary residence. Does anyone have any advice?
 
It's going to depend.

After the recent Tax Reform, the Child Tax Credit has been SUBSTANTIALLY increased to $2,000 per dependent child. This means, if you pay $18,000 in taxes for the 2018 year each child will lower that amount by $2,000. Previously, the child tax credit was MUCH smaller - but you got a deduction for each dependent. That is no longer the case - however, the $2,000 tax credit is actually better (IMHO).

HOWEVER, since this is a tax credit - unless you actually PAID federal taxes for the year you might not get the entire credit. So for example, this is a $2,000 tax credit... but lets say you only paid $1,000 in federal income tax for the year (obviously from being low income)... In that case, the refundable amount is only up to $1,400 since you (the taxpayer) didn't pay a full amount of $2,000 to be refunded.

See URL below.

https://smartasset.com/taxes/all-about-child-tax-credits

Itemizing vs. Standard deduction has nothing to do with it for the most part unless you have something like... a large amount of medical expenses related to the child. It's mostly based on how much income tax was paid to maximize the refund.

Since your ex has an income of at least $50k, I would venture to say whether you take the tax credit or she does will make no difference... $2k is $2k.
 
TheSiege said:
My ex doest make much, maybe 30k, at most. I make a lot more than here. Normally she claims one child and I claim the other. She is single. I am married. I am wondering if this year claiming both kids would be more beneficial for me since I know she is taking the standard deduction. My wife is also in the same situation. She has 1 kid, who is my step daughter. Her ex makes maybe 50k a year and is single. I am wondering if we should claim her daughter as well. I know our exs would have to agree to this, but if doesnt benefit them any and it does us, we could split the difference. I am not sure if I am going to itemize. I have a rental property and only paid 9900 in mortgage interest on my primary residence. Does anyone have any advice?
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Pretty sure she’ll fight you on that as she is probably claiming head of household and that gets her a huge benefit. Like several thousand dollars tax credit. You won’t see anywhere near that much by claiming the extra child.
 
JulesMaximus said:
Pretty sure she’ll fight you on that as she is probably claiming head of household and that gets her a huge benefit. Like several thousand dollars tax credit. You won’t see anywhere near that much by claiming the extra child.
Click to expand...

Didn't think about that - but absolutely correct. Head of household standard deduction is $18,000 vs. $12,000 single.
 
TheSiege said:
My ex doest make much, maybe 30k, at most. I make a lot more than here. Normally she claims one child and I claim the other. She is single. I am married. I am wondering if this year claiming both kids would be more beneficial for me since I know she is taking the standard deduction. My wife is also in the same situation. She has 1 kid, who is my step daughter. Her ex makes maybe 50k a year and is single. I am wondering if we should claim her daughter as well. I know our exs would have to agree to this, but if doesnt benefit them any and it does us, we could split the difference. I am not sure if I am going to itemize. I have a rental property and only paid 9900 in mortgage interest on my primary residence. Does anyone have any advice?
Click to expand...
Yep!! This is the place to get informed expert legal,,,oopps I mean tax advice!! After all what could go wrong??? You need to see a CPA!!
 
We used to have this awesome dude around here that did an annual thread. Super helpful. CPA, I think? He retired though. 🙁

Then this one guy randomly thought he should take over the next year, then decided to be an ultra-prick to the first couple of people that posted, for no damn reason. It was kinda hilarious more than it was surprising like....who can be such a colossal prick like that while trying to answer an innocent tax question...on top of giving observably terrible advice? ...and that was the funny part. A self-proclaimed "tax expert," that gave (And gives) pretty terrible tax advice over and over again.

I forget who that was, but I recall it pretty vividly. It was lol for a while, this thread. The annual thread ended because of it. 🙁
 
Run your numbers through a tax program for all four (?) scenarios and see which nets you the largest refund. Do that, then distribute the difference as appropriate.
 
snoopy7548 said:
Run your numbers through a tax program for all four (?) scenarios and see which nets you the largest refund. Do that, then distribute the difference as appropriate.
Click to expand...

His ex-wife’s refund is not his refund. If she is not married and is caring for one of the children she can file as head of household which gives her a big tax credit. This tax credit doesn’t lower her AGI, it is a dollar for dollar tax credit, which means big refund.

If he claims both kids she can’t claim this and she loses thousands of dollars. I really don’t think he wants to do this.
 
JulesMaximus said:
His ex-wife’s refund is not his refund. If she is not married and is caring for one of the children she can file as head of household which gives her a big tax credit. This tax credit doesn’t lower her AGI, it is a dollar for dollar tax credit, which means big refund.

If he claims both kids she can’t claim this and she loses thousands of dollars. I really don’t think he wants to do this.
Click to expand...

The Child Tax Credit takes a TON to phase out now. You need roughly $200k for that $2,000 child tax credit to start phasing out.

The CTC phases out at an income level of $200,000 for single filers and $400,000 for joint filers. In 2017 the phase-out level was $75,000 for single filers and $110,000 for joint filer
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I can understand strategizing the tax credit and potentially splitting it with a former partner - but in this case since his wife makes $50k, I'm fairly certain she is paying at least $2,000 in tax yearly. One of the main driving factors is (like you correctly stated earlier) is that with her claiming the kid she can also claim as a head of household - which has an additional deduction that OP wouldn't be able to claim (or rather, he has likely already claimed since he has another child that he claims).
 
from https://turbotax.intuit.com/tax-tip...ming-a-dependent-on-your-tax-return/L8LODbx94 - Qualifying child
In addition to the qualifications above, to claim an exemption for your child, you must be able to answer "yes" to all of the following questions.

  • Are they related to you? The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, adopted child or an offspring of any of them.
  • Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There is no age limit if your child is permanently and totally disabled.
  • Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.
  • Do you financially support them? Your child may have a job, but that job cannot provide more than half of her support.
  • Are you the only person claiming them? This requirement commonly applies to children of divorced parents. Here you must use the “tie breaker rules,” which are found in IRS Publication 501. These rules establish income, parentage and residency requirements for claiming a child.
Click to expand...
 
Don't you only get to claim deduction of a child (under 18) you've supported ? Only one couple can claim them on a joint tax declaration IIRC, whoever has child custody/support? 😕
 
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