Learning about the tax implications of divorce helps immensely reduce frustration and avoid financial blunders.
There is a lot to take care of when you are considering divorce, in the middle of a divorce, or even after the divorce has been finalized. Divorcing couples should take time to learn what they can expect when it is time to file their taxes as newly divorced people. The right information goes a long way in keeping your emotional, mental, and financial burdens as light as possible.
Tax Filing Status
The first thing to know about taxes for divorced people is that your filing status depends on your marital status on the last day of the year. For instance, if the divorce is finalized before December 31st, you can file as either the head of household or single. If the divorce has not been finalized by the last day of December, you and your soon-to-be-ex-spouse will need to file as a married couple, either jointly or separately. That said, there are exceptions, such as the ability to claim a child exemption. Be sure to discuss such exemptions with your attorney and your accountant.
It Might Be Worth It to File Jointly
With the expenses involved in divorce, the last thing you want to deal with is another, often substantial, financial obligation like taxes. For that reason, you and your soon-to-be-ex-spouse might want to wait to finalize your divorce until the new tax year. Doing so and filing jointly affords you the same tax credits, exemptions, and tax deductions that you are used to, which can make your tax burden easier. To help you decide, sit down with an accountant to determine how much your tax bill would be if you file by yourself, compared to how much it would be if you file jointly.
Something else to keep in mind is your and your current spouse’s financial responsibility. Know that even if you take care of your portion of the tax bill, you will be responsible for anything that goes unpaid by your ex-spouse.
Child Support and Alimony
Both alimony and child support are additional considerations to keep in mind when tax season rolls around. Specifically, paying or receiving child support does not affect your tax bill, either positively or negatively. The opposite is true for alimony: it is considered income and is taxed as such. You can deduct the alimony you pay, and you have to include the alimony you receive when calculating your income for the year.
Be sure to include an accountant in your divorce discussions. Paired with your attorney, the information they both provide can keep you on the IRS’s good side.
