You made it through the grueling process of getting divorced, which is difficult enough, but now you have one more hurdle: filing your taxes. Divorce brings various emotional, physical, and financial changes, including a new approach to handling your taxes. Understanding what happens to your taxes if you get divorced is crucial, as these changes can significantly impact your financial situation. Here are three common tax questions we hear from clients dealing with divorce.
What is my new filing status after the divorce?
If you finalize your divorce on or before December 31, the IRS considers you divorced for the entire tax year. If you have a child or qualifying person living in your home for more than six months of the year and pay more than 50% of the costs to maintain the home, you can file as “Head of Household.” You also qualify for a higher standard deduction and lower tax rate than filing as “Single.” As a custodial parent, you may be eligible for certain credits and exemptions, such as the childcare credit, the earned income credit, and the child tax credit.
Do I have to pay taxes on my support payments?
Regarding taxes and divorce, it’s essential to differentiate between child support and alimony. Child support payments are tax-neutral because the recipient does not owe taxes on them, and the payor cannot deduct them. Rules around the taxation of alimony (also known as maintenance or spousal support) depend on when you finalize your divorce. For divorces finalized on or after January 1, 2019, alimony is neither taxable to the recipient nor deductible for the payor.
What do I need to plan for regarding my taxes after divorce?
When your tax filing status changes, brackets and deductions also change. If employed, you should submit an updated IRS Form W-4 to your employer to withhold the correct amount from your pay. If you have a business or non-wage income, you may need to start paying or updating the amount you already pay in estimated taxes.
Taxes can be complex and intimidating but are also not something you can avoid or postpone indefinitely. If you need help navigating this or other financial topics after a divorce, we are here to help. Feel free to reach out for guidance on your post-divorce financial landscape!
