taxes after divorce - questions about splitting prior year state refund, capital loss carryforward, and asset depreciation

[Rotciv]

Hi TurboTax community,  been using the product for 13 years and unfortunately this year I am dealing with a whole can of worms due to a divorce in 2022. We filed as married joint for 2021 tax year, and now are filing as single in 2022 tax year. Here are my questions

1. In the Wages and Income Section, 2021's State tax refund is carried over from the 2021 returns. However that is the full figure from joint filing.  Do we just split the figure in 1/2 for this year's filing?

2. In the Wages and Income Section, Capital Loss Carryover is requested from 2021.  That is on a jointly owned investment account that we continue to jointly own for 2022.  Do we just split the carryover amount in 1/2?

3. In the Wages and Income Section, Rental property section, there is data requested from 2021 for Assets/Depreciation.  We have agreed to a 50/50 split in the rental income property and continue to jointly own it for 2022.  Do we once again split the Total original Cost and prior depreciation figures in 1/2 to order to carry the right figures forward?  

Thank you

[AliciaP1 · Accepted solution]

I'll answer your questions by your numbers:

1. Yes.  If you agreed in the divorce to split most things from your prior years' returns, it makes the most sense to include this in the split.
2. Yes, just be sure that if it is an odd number you don't both round up so the total new carryover is slightly higher than the joint.
3. You do not need to split the rental details, you need to change the ownership % in the details about the rental.
   • To do this in TurboTax Online you can follow these steps:
     1. Within your tax return click on Wages & Income in the black menu bar on the left
     2. Click Edit/Add for Rental Properties and Royalties (Sch E)
     3. Click Edit for your rental property
     4. On the Do any of these uncommon situations apply to XXX? screen click I was not the only owner of this rental
     5. Enter your ownership percentage on the next screen
     6. On the Want us to divide XXX expenses for you? screen click Yes, I will enter total amounts and have TurboTax calculate 50% since you have depreciation and asset value carrying over from prior years

[Rotciv]

Thank you for the quick response Alicia.  Do you happen to have the reference to the corresponding IRS rule? I was looking at publication 504 (their document on divorce) but I did not see any of these issues covered.

Regards.  

[DianeW777]

Yes. There are information details about divorce and your tax return for your reference. 

• Getting Divorced 
• IRS Tax Considerations for Divorcing or Separating
• IRS Publication 504 (you have already reviewed)

As long as you have agreed to how you will report your joint taxable items and jointly owned property, and I would suggest it be in writing for future use, you can make the split on each of your returns. Part of the answer does depend on what is written in the divorce decree.  From the date of the decree forward you must follow what is written, and assumed decided then.

[Rotciv]

Hi, regarding the solution to ownership % of rental property, I have changed the ownership percentage to 50% per prior response.  However, turbo tax arrives at the same depreciation expense amount as when first calculated with 100% ownership.  Does this make sense? Seems odd to me that each of us would end up with 50% ownership and both of us would end up claiming the same annual depreciation expense as before when we were filing joint.  Thanks. 

____________________________________________________

You do not need to split the rental details, you need to change the ownership % in the details about the rental.

• To do this in TurboTax Online you can follow these steps:
  1. Within your tax return click on Wages & Income in the black menu bar on the left
  2. Click Edit/Add for Rental Properties and Royalties (Sch E)
  3. Click Edit for your rental property
  4. On the Do any of these uncommon situations apply to XXX? screen click I was not the only owner of this rental
  5. Enter your ownership percentage on the next screen
  6. On the Want us to divide XXX expenses for you? screen click Yes, I will enter total amounts and have TurboTax calculate 50% since you have depreciation and asset value carrying over from prior years

[DianeW777]

TurboTax would split all of the expenses however, tt appears the asset entry assumes you already entered only your half of the asset cost. I would suggest splitting the cost of everything including the assets, then enter then in each of your returns.  Splitting can become difficult when the property is rented all year (all days of the year). This will provide the desired results without working with the percentage.  

Go back to the Property Profile or Property Info and change it to the 100% ownership and split the expenses.  

[Rotciv]

Understood , should I also split the prior depreciation figure that is being carried forward from the 2021 joint return?

[DianeW777]

Yes.  Depending on what you do with the property next year (2023) this may need to be addressed again when you prepare that tax return.