Divorce shakes up the tax situation of ex-spouses. We can win or lose. Here are the 5 consequences of a breakup.
Taxation of income, capital gains, deductible expenses, tax credit, dependent children… Divorce completely changes the situation of the spouses with regard to tax. Here’s what awaits you.
Income tax: every man for himself
For a married couple, the rule is single taxation for the household: they complete a single income declaration, the tax authorities send them a single income tax notice established in both their names. Divorce changes the situation: the ex-spouses will have to make a declaration each on their own. Before the divorce is finalized, it is already possible to make a separate declaration if the spouses do not live in the same place and have separate incomes.
Redistribution of shares
The family quotient mechanism aims to attenuate the strong progression of the income tax scale thanks to the shares and half-shares mechanism. The higher your number of shares, the lower the taxes if you are liable for income tax. With divorce, the spouse who has custody of the minor children will recover their shares. And this is half a share per child dependent for the first 2, then a full share for each child from the 3rd. The quotient system is improved for the divorced parent who has not remarried and is not cohabiting. He has the status of a single parent: his first dependent child counts for a full share of the family quotient.
Read this topic: Box T and its dangers for the single parent
In the event of alternating residence, both parents share the tax advantage of the shares equally.. For example, for a 1st or 2nd child, it will be 0.25 shares. This principle is similar for other benefits which will then be calculated on half of the tax ceiling. For example, the tax credit for childcare costs for young children (nursery, childminder, daycare, etc.) is calculated based on an annual ceiling of 3,500 euros. In the event of alternating residence at the home of each divorced or separated parent, the limit is 1750 euros per parent, i.e. a maximum tax credit of 875 euros. The childcare costs incurred for each child under 6 years of age in alternate residence are indicated in boxes 7GE, 7GF, 7GG of the 2042 RICI income declaration.
See also: How to deduct childcare expenses from your taxes
Updating the withholding at source
The divorce must be declared to the tax authorities no later than 60 days, online, via your private space on impots.gouv.fr, section Manage my direct debit at sourceThen Report a change. Thanks to this action, a new rate will be calculated automatically and transmitted to your employer (or other collecting organization such as pension funds, unemployment, etc.) for consideration within a maximum of three months, explains Bercy. You can also make this declaration by post to the General Directorate of Public Finances (address to the Public Finance center at your home).
Real estate: pay attention to the added value in sharing
During a divorce, logically, the spouses do not wish to keep the common real estate and prefer to sell it. As a general rule, the capital gain realized on the sale of a principal residence is not taxable. But in the event of divorce, specific rules apply to benefit from the exemption.
In principle, the share of the capital gain of the spouse, who left the marital home without waiting for the divorce, is taxable. Exemption is possible under two cumulative conditions. The home sold must still be used as the main residence by the ex-spouse until the sale, which must therefore be the consequence of the separation and must take place within a reasonable period of 12 months.
It happens that one of the spouses continues to live in the home for a while while paying the other an occupation allowance. A ministerial response from December 2019 specifies that this rent constitutes taxable property income for the spouse who receives it.
The fiscal price of the breakup
Divorce results in the sharing of property acquired during the marriage by both spouses. The latter must detail in the divorce agreement the net community assets, that is to say list the property shared between them as well as their value. Everything goes: house, apartment, savings accounts, stock market portfolio, cars, bank account balances, furniture… You must then pay a sharing fee of 2.50% of the amount of the shareable assets (deduction of debts). This sharing right tax is 1.10% effective January 1, 2022. For assets less than or equal to 5,000 euros, the sharing right is fixed at a flat rate of 125 euros.
The trick to evading the right to share
When possible, it is wise to sell everything and divide community assets before filing for divorce. Result, the divorce agreement will not indicate any property to be divided and you will legally avoid the payment of sharing rights.