Wondering how your divorce will affect tax time? Generally, it’s a good idea to consult a tax professional, especially if this is the first year you will be filing taxes after a divorce. While tax issues are complicated and situation specific, here’s an overview of things to keep in mind about taxes and divorce:
Your marital status on December 31st of any given year determines how you can file. For example, if your divorce is made final at the very end of the year, you are treated by the IRS as divorced for the entire filing year. It doesn’t matter that you may have been legally married for 364 days and divorced for only one, you can no longer take advantage of married filing jointly for that tax year.
Maintenance or spousal support (what used to be called “alimony”) is treated as income to the person receiving it. That means that if you get maintenance, the government is going to tax you on it just as it does your earnings from work. If you know this ahead of time, you can decide whether or not you want to set aside money each month so that you don’t come up short on April 15th. Some people also ask their employers to withhold more tax from their paychecks. If you are the one paying maintenance to a former spouse, the silver lining in your cloud is that you get to deduct it from your taxes.
Child support is not treated as income and has no tax consequences to either parent. If you receive child support, you do not have to pay tax on the money. If you pay out child support, you cannot deduct it from your taxes.
Property transfers between divorcing spouses usually doesn’t have any tax implications. For example, dividing up retirement or transferring stocks to an ex spouse won’t matter at tax time. There are some exceptions so be sure to discuss the specifics with your tax professional.
All aspects of divorce should be carefully considered at the outset. If a divorce is what you need, it is going to happen but a little preparation and an understanding of what you can expect will go a long way to easing the stress of divorce. Sit down and talk with divorce attorney Carol O’Connor Cadiz, located in Schaumburg and Itasca, and get your questions answered. Don’t forget to read my free book, Defending the Ending.