Divorce is an exhausting and complicated process. Unfortunately, taxes are a major part of this major transition – in addition to being emotionally painful and exhausting. Divorce taxation can present several complicated accounting, business and tax-related issues. The process presents many disputes which can require extensive valuation or forensic accounting to uncover hidden or missing assets. Balog+Tamburri CPAs marital dissolution specialists can work closely with family law attorneys to examine all financial aspects of your divorce situation.
Here are some key tax tips to keep in mind if you get divorced or separated:
If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.
Taxation of alimony on federal returns changed because of the Tax Cuts and Job Act of 2017. Today alimony or separate maintenance agreements dated January 1, 2019 or later are not tax-deductible by the person paying alimony. The person receiving alimony does not have to report the alimony received as taxable income. This is a major change from prior law, which required the recipient to include such income and allowed an above-the-line deduction to the payor.
Alterations to divorce agreements signed before January 1, 2019 may have new tax implications and could fall under these new rules.
If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
If you change your name after your divorce, notify the Social Security Administration of the change. The name on your tax return must match SSA records. A name mismatch can delay your refund.
Who Claims the Children?
Be sure to work out who will claim the children as dependents and for which years. Your lawyer can help you come up with a reasonable agreement ahead of time. Beware that if each ex-spouse claims the same dependents on his or her returns, it can delay filing and refunds.
Depending on when you separated or divorced, your filing status may be married or single. It’s important to speak with Balog+Tamburri CPAs to figure which is the most advantageous for tax purposes. After the divorce is finalized, you may qualify to file as Head of Household depending on a number of factors.
Being proactive and understanding your tax situation can possibly save you substantial taxes during and long after your divorce is final.
Balog + Tamburri is proud to be a part of the group Divorce911, located in Atlanta, GA. For more information, please click on the logo.