How will your divorce affect your tax note?

How will your divorce affect your tax note?

Soon you will have to file your tax note again, but how will any divorce affect this filing?

We already wrote an article on when to file a joint or separate return. Would you like to know more about when exactly you need to file a separate return? You can here read.

This article covers the main tax consequences of divorce and its impact on your tax note, specifically the marriage quotient, mortgage loan and maintenance contribution.

Marriage quotient

The marital quotient is a scheme that allows tax relief by allocating part of the professional income of one partner to the other. This system is especially beneficial if one of the partners has no or a very low professional income. This reduces the total amount of tax you have to pay as a couple, resulting in a lower tax rate.

After divorce, the tax benefit of the marital quotient will disappear. Both ex-partners will be taxed individually on their own income, without the possibility of allocating part of the income to the other for tax purposes.

Mortgage loan

The joint home does often pose a difficult issue in divorces, mainly because of the tax benefits associated with it. For mortgage loans taken out before 1 January 2020, there was a tax benefit called the 'housing bonus'.

When a mortgage loan is taken out jointly, tax relief is applied and calculated for each partner. How this benefit is treated after divorce depends on the destination of the property.

• If you sell the property together, you will continue to enjoy the benefit even if you file a separate return. You are that no longer an owner, but still the borrower to which the housing bonus is linked.
• If you sell the property and pay off the loan with the sale proceeds, the tax return advantage disappears. After all, you are then neither the owner of the property nor the borrower.
• If one partner takes over the home, the benefit will only apply to his or her tax return. This is in view of the fact that the other partner is the full owner from then on and has also taken the full home loan.

Maintenance fee

Under certain conditions, the obligated ex-partner can deduct the maintenance contribution for tax purposes, resulting in a reduction of taxes due. However, the receiving ex-partner should declare the maintenance contribution received as taxable income in his or her tax return.

It is important to note that the tax treatment of maintenance payments can vary depending on the type (spousal or child maintenance) and the specific circumstances of the situation.

Dependent children tax

If you have your dependent children, you are entitled to a tax benefit in the form of an increase in the tax-free allowance.

This benefit can normally only be granted to the parent with whom the children have their tax residence. However, tax benefits can be shared equally between both parents in case of "tax co-parenting". This applies if the child's residence is equally divided and if no maintenance contribution is paid for the child. Indeed, the principle is then assumed that each parent provides half of the child's financial needs.

Both parents report in their tax returns that the child is "dependent but in co-parenthood". The tax benefit is then shared equally: both parents get half the tax-free allowance each.

If you have any further questions related to filing your tax return after divorce, please do not hesitate to contact us at info@bannister.be or leave a message on our website. Our lawyers will guide you with the necessary expertise.