Wisconsin divorce tax laws can have a serious effect on a spouse’s financial situation. Careful tax planning must occur before the divorce is granted. Following are some issues that I consider with all my clients:

1. Couples usually file married jointly during a marriage. However, after the separation, former spouses must file as either single or head of household. The IRS rules on this subject are very particular. A parent must have at least 183 days with the child to file as Head of Household. Proper planning can ensure that each parent (if they have at least 2 children) can save on taxes by filing as Head of Household.

2. Post-divorce, couples must determine who will claim the child(ren) as exemptions. The rules for claiming tax exemptions are more flexible. Careful planning will ensure that the exemptions are awarded to the parent who would obtain the most overall tax savings.

3. The deductions for real estate taxes and mortgage interest must be calculated. If the marital home is sold, couples must carefully consider potential taxes. Short sale or foreclosure of the home can increase tax obligations. That possibility must be considered or the parents could get a nasty tax surprise

4. Outstanding tax refunds must be allocated. Taxes due must also be allocated and payment deadlines set to avoid penalties. If taxes were improperly filed during the marriage, one spouse should seek protection for the other’s incorrect filing.

5. If one or both spouses own a business, business income and tax returns must be determined and allocated correctly. This is particularly true since businesses often calculate income based on a different fiscal year. Spouses must be aware that a business tax return does not show the actual income paid to a spouse.

6. Child and spousal support must comply exactly with IRS rules to avoid future tax problems. Different combinations of child and spousal support, and even cash payments, can result in substantial Wisconsin divorce tax law savings.

Failure to anticipate tax consequences can have serious effects, even many years after the divorce. The above tax rules may also apply to unmarried parents in paternity cases. I work with all clients on these tax issues to avoid an unpleasant surprise down the road. Wisconsin tax issues are just as much part of a divorce case as custody, support, and property.