Divorce and Your Taxes: What You Need to Know
It’s tax season, and that means getting your files together, making sure your numbers match up, and most importantly, figuring out what you qualify for in terms of refunds, write-offs, and reductions. This can already be a headache for those with complicated financial status, but throw in a divorce and that can make the process even trickier. Our team has come up with a few essentials to consider before filing your taxes after a divorce, upcoming or recent.
Joint or Separate Filings
In many separation agreements, the parties reach an agreement as to whether to file joint or separate tax returns. If you haven’t already filed for divorce, consider this detail when drawing up your agreement papers. If you have finalized your divorce and did not decide on joint or separate returns, you must usually file separately starting the year the divorce is finalized unless a separate agreement is made after the divorce is finalized.
Claiming your Children
Usually when parties execute a separation agreement, the specification of who can claim a child exemption is decided and placed in the paperwork of the divorce. If you are sure that no agreement had been made, the exemption then usually goes to the custodial parent of the children. This can become contested if the parties have a “shared custody” arrangement. Be sure to check all of your essential paperwork before filing to avoid mistakes and confusion.
Normally Post Separation support and Alimony, are considered income to the recipient, and tax-deductible for the payor, unless the parties have agreed to some other arrangement. It is important that if alimony is being paid pursuant to a separation agreement, that the parties make clear that the payments are not in the nature of child support, if the payor will later seek to deduct the same on his or her tax return.
Changing forms and Thinking about Legal Fees
Ask to have extra tax withheld from your paycheck to cover all your old and new liabilities. Not withholding enough could result in some shocking increases to what you owe. In addition to making sure you’re withholding enough, consider that most legal fees are not tax deductible with the exception of fees having to do with tax advice, title fees, or real estate closings.
If you have questions regarding how your divorce agreement could impact your taxes, consult Schulz Stephenson Law. Please note that while we don’t specialize in taxes, we can help you gather any necessary documents and answer any questions about how your taxes may be impacted after a divorce.