Getting a divorce is stressful on its own, and paying taxes is its own difficult experience, too. When you put the two together, you may find it hard to cope. Divorcing brings a whole new set of tax issues that you must consider.
With so many things to worry and think about, it can feel impossible to understand how divorce will impact your taxes. Here is a list of four of the main ways your divorce may change the way you pay taxes:
1. Your filing status
Of course, you need to assess how you will file taxes. Your marital designation on December 31 will determine your filing status. If your divorce is final before the New Year, you must file separately from your ex-spouse. Additionally, if you obtain custody of your kids, you may be able to check the “head of household” box.
2. Claiming dependents
You may face some confusion when it comes to claiming your children on your tax return. Generally, if you have sole custody of your kids, you have the ability to claim them as dependents. However, if you are in the middle of a divorce and your spouse is still living with you, you may face some complications. If you are in a grey area like this, try to come to an agreement with your spouse.
3. Support payments
Remember that alimony is deductible for whoever pays it. Similarly, the receiver of spousal support must claim it. However, child support is not deductible or reported.
4. Property division
The way you split your marital assets may affect your taxes in the future. While getting a particular asset may seem like an advantage at first, it may come with hefty tax obligations. For example, if you get the home but sell it later, you may be subject to capital gains taxes. Carefully assess the tax implications of any property division agreement.