Divorce is never easy. It’s filled with twists and turns that you usually don’t see coming. But when you use a non-adversarial approach, such as the collaborative divorce process, you both will work with a team of professionals that can help guide both of you and help you sort out your tax filing needs.
One of the professionals on the team will be a neutral financial professional. This expert will not only be there to guide you and your spouse through your financial landscape but also help you see how your tax profile will change. This is extremely valuable when you are trying to establish what your tax responsibility will be post-divorce.
Here are a few ways your tax liability will change once your divorce is finalized:
- Filing status – If your divorce was finalized by December 31, 2021, you will now file as single for the 2021 tax year (unless you have dependents).
- Head of Household – depends on where the children lived most of the time and paid for more than half the costs of your home
- Spousal Support (Alimony) is not tax-deductible unless you were divorced prior to 12/31/2018
- Child support is not tax-deductible no matter when you were divorced
Other tax issues that may come up in divorce:
– capital gains on the sale of the family home
– taxes on the sale of rental properties
– taxes and penalities on funds withdrawn from retirement plans (can often be avoided)
Let a team of experienced and knowledgeable professionals help you and your spouse address these issues in the way that best suits your family.
When your divorce is finalized, your tax liability does not get erased. You are still responsible for paying your fair share.
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 considers how your 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.