Learning about the tax implications surrounding divorce helps immensely when it comes to reducing frustration and avoiding financial blunders.
There is a lot to take care of when you are thinking about divorcing, are in the middle of a divorce and even after the divorce has been finalized. Divorcing couples in Missouri, Illinois, Kansas and Oklahoma should be sure they take out some time to learn what they can expect when it is time for them to file their taxes as newly divorced people. The right information goes a long way in keeping your emotional, mental and financial burden as light as possible.
Tax filing status
The first thing to know about taxes for divorced people is that your filing status depends on the status of your marriage on the last day of the year. For instance, if the divorce is finalized anytime before December, 31st, then you have the option of filing as either the head of the 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 being said, there are exceptions to this, such as being able 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 expense involved with 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 how financially responsible you and your current spouse are. 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 two more considerations to bear in mind when tax season rolls around. Specifically, paying child support does not impact your tax bill negatively or positively, and the same applies to receiving child support. The opposite is true of paying alimony, as 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 discussions of divorce in Missouri, Illinois, Kansas and Oklahoma. Paired with your attorney, the information they both provide can keep you on the IRS’s good side.