What can I deduct if can't agree with my wife

[chunhuach]

Me and my ex were married on the last day of 2023, and divorced on Jan 2024.

for 2023 tax, If we file separately, how can we determine who get to deudct what?

1. We have two dependent children, our divorce agreement says each of us can claim one child. but it didn't say the timing, I just assume it's for after the divorce. so for 2023, I think I can claim both since I have a high AGI (based on some rules I read online). is this right?

2. We co-own a house, she's the only one on the loan. she's been paying mortgage so the 1098 have her name only. she says she can deduct all of the interest. however I researched and it seems if we are in a community state, such interest should be splitted equally so each of us can deduct half. is this right?

3. we also have property taxes, if we can't agree, can I claim half?

4. we have some shared account which has dividend and interest, she just says she won't report any. I don't want to be the one bearing of tax liabilities for these. is it safe for me to just report half of the dividend income?

In general, if we can't agree I think I will go ahead claim half of everything. If we can't agree with each other and went ahead file tax our own way (e.g. each of us claim two kids as dependent), will we  be in a big trouble?

[Mike9241]

what state since community property laws vary? Generally, community property does not include income earned or debts and expenses incurred before marriage.  Once you respond with the state someone may provide further guidance. 

https://www.legalzoom.com/articles/the-ins-and-outs-of-community-property-law#Defining%20Community%2... 

as to the children, the first rule is the parent with whom their children lived the greatest portion of the year. if that is a tie then you are correct the one with the highest AGI from an IRS standpoint.  Check with your attorney for how this would apply for 2023. Violating a court order will cause you trouble if your ex pursues the matter.  

[Hal_Al]

The smart move is to file as Married Filing jointly (MFJ)and agree on how you will split the refund. 

Be aware of one special rule: if you file as Married Filing Separately (MFS) you both must use the same type of deduction (standard or itemized). You are not allowed to use the standard deduction if the other one itemizes. 

[Mike9241]

there is one other possibility, If audited, the IRS may be able to declare this a sham marriage which is not a marriage under the tax laws. it all depends on why you got married on 12/31 and divorced in January. 

[chunhuach]

This is in WA state.  The marriages lasted 15 years so IRS shouldn't challenge the legitimacy.

There's no pre-marriage property involved, it's all community property.

We have:

* Shared bank account which received interest.

* Shared investment account which receives dividend and had stock sale gains.

* Shared investment property which has associated rent income/costs.

She's not willing to corporate, thats' why it's getting harder.

If we are in agreement, I guess we can decide who to report/deduct which item.

If we can't reach agreement, is it safe for me to half of everything (deduct half of the mortgate interest, report half of the dividend income,  report half of the rent income/expense, etc)?

Thanks!

[Vanessa A]

Yes.  You would be fine to split everything in half as WA state is a community property state that splits almost everything 50/50. So yes, deduct half of the mortgage interest, half of the dividends and half of the rental income and expenses. 

[Opus 17]

If you were married for all of 2023, the community property rules apply.  If you file separately, you should generally each report half the total family income (you report half of her income and she reports half of yours), you each report half the deductible items (regardless of who pays).

You don't really have a choice to have only one spouse claim the mortgage and only the other spouse claim bank interest.  State law controls how you file, so see a CPA in your state if you aren't sure, but you really need to reporting everything 50/50.**

If you agree, you can "divide" the children any way you like.  You are correct that if you can't agree, the tiebreaker goes to the spouse with the higher income.  But if you agree to claim one each, that's perfectly fine, the tiebreakers only apply if you can't agree.

You should file a correct return that reports half of everything regardless of what you think your ex will do, if you file separately, then any mistakes or problems with her return that don't match your return are not your concern.

**In some cases, some property and income might belong to only one spouse instead of the marital "community."  For example, if you owned a rental house before the marriage, and you have continued to rent it out and manage it, then it might be your property only instead of community property.  The same might be true for retirement accounts and investments that were solely owned before the marriage (but not new contributions or investments after the marriage.). Again, this may require a CPA to untangle. 

[chunhuach]

that's wild:)

we were separated as of May 2023. I make much more than her, pay more taxes.

She's refusing to file joint return thinking she owns only little tax. I can't imaging she will report half of my income, which is 5x of hers.

[VolvoGirl]

If you lived apart for the last 6 months of the year and have a child you or her can maybe file Head of Household. If you each have a child living with you then both can claim Head of Household.  Don't know how that works with community property rules.  

[Opus 17]

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@chunhuach wrote:

that's wild:)

we were separated as of May 2023. I make much more than her, pay more taxes.

She's refusing to file joint return thinking she owns only little tax. I can't imaging she will report half of my income, which is 5x of hers.

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This becomes more complicated.  You said you were married for all of 2023, but if you separated in May, 2023, then your marital "community" may have ended in May (depending on state law).  In that case, each spouse would report half the community income (up to the date the community ended) and then after that, only their own individual incomes. And, if your spouse is required to report half of your wages from January-May, they would also get credit for half your withholding during that time.   You really need to see a specialist in your state.  

[chunhuach]

none of us can claim HH since we still live together for all of 2023. but thanks for the reminder!

[VolvoGirl]

Oh, I thought you separated in May.  

[chunhuach]

yes sorry I can make it clearer.

she filed for divorce at end of Apri 2023. At that point we took a snapshot of our assets. we still live in the same house (for the benefit of the children), but our finances are separated.

[Opus 17]

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@chunhuach wrote:

yes sorry I can make it clearer.

she filed for divorce at end of Apri 2023. At that point we took a snapshot of our assets. we still live in the same house (for the benefit of the children), but our finances are separated.

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Please see a tax expert.

It appears that your marital "community" ended when your wife filed for divorce, even though you continued to live in the same house.

https://www.genesislawfirm.com/community-property-wa-divorces

That probably means that one your tax return, you report half of your own income income from 1/1/23 to the date of divorce, and half of her income for those dates, and half of any bank interest or investment income that was paid during those dates (regardless of when the interest was technically earned).  Then you only report your own income from the date of the filing to the end of the year.  She must do likewise.

It is not clear to me how investment income would be divided after the date of the filing.  That may also be an item for the judge to consider when dividing your assets, so you might not want to pay taxes on that income until you find out how much will be yours and how much to your ex.  It is also not clear how job withholding should be divided, although I presume in proportion to the income.

You really need a specialist for this year, unless you can agree to file jointly.