Not only does a divorce bring emotional turmoil, but it also brings financial fallout, especially during tax time.
When you agree to use collaborative divorce process, you have access to neutral financial professionals who can help with you plan for taxes going forward and help both of you develop an agreement that each person can sign off on.
Here are a few ways your tax filing will change after you are divorced:
- If your divorce was NOT finalized by 12/31/2019 – you will file as “married separate” or “married joint”
- depending on when you separated, you may be able to file “single” or “head of household”
Each filing status will effect your taxes differently, sometimes significantly, so its important to consult with an tax accountant as part of your divorce.
- Once finalized, you will file as “single” or “head of household”, unless you re-marry
- Dependents will be determined as part of your divorce agreement, certain IRS rules apply, but there is some flexibility to negotiate this to maximize tax benefits.
- Child support
- It is considered a tax-neutral money exchange
- You can’t deduct child support that you have paid
- The recipient can’t claim child support as income
- You can’t deduct it, nor can it be claimed by the recipient
However, if you were divorced before the change in the tax law that took effect January 1, 2019, your alimony may be deductible to the person paying it and taxable to the person receiving it, even if you modify or change the amount now.
Taxes are confusing, and when you add a divorce into the mix, the water gets even murkier.
Our team of experts can help you and your spouse learn how your divorce will influence your tax filing and how to prepare for these changes correctly.
The Collaborative Practice of San Diego is a nonprofit, multi-disciplinary referral network of independent professionals of attorneys, mental health professionals and financial advisors working together to learn, practice, and promote Collaborative processes for problem-solving and the peaceful resolution of family law issues in regard to co-parenting, with an eye toward preserving the emotional, as well as the financial and tax issues of the family.
Contact us today to learn how to develop a separation agreement that can be mutually agreed upon by both of you that takes into consideration how both party’s taxes will be impacted!
Note: This information is general in nature and should not be construed as legal/financial/tax/or medical advice. You should work with your attorney, financial, medical or tax professional to determine what will work best for your situation.