As if divorce does not come with enough worries, taxes are yet another consequence you have to consider. You may wonder how you should file, especially if your divorce will not be final for months. Or perhaps your divorce is already over and you do not know how to file due to the recent changes.
Regardless of your situation, the time to review your tax options is now. You do not want to wait until tax season when accountants have an overload of work and you are scrambling to get all your documents in order before the deadline. This is what the IRS has to say about how divorce affects taxes.
If you have changed your surname following your divorce, you must update your records with the Social Security Administration. Your names on your card and your tax return must match or you may experience delays and other problems.
Divorce has tax implications for the following assets:
- Health insurance: You must have your own coverage or allocate a shared policy.
- Community property: You will need to determine what is community and separate property.
- Retirement accounts: The timing of your divorce will decide if you can deduct contributions to your ex’s IRA.
Your custody arrangements will also determine if you can claim your children as dependents.
Child and spousal support
If you pay child support, you cannot include it as a deductible on your tax return. Likewise, if you receive child support, taxes cannot touch those payments. However, for spousal support, mandatory payments are both deductible and taxable. This information is especially important to know for budgeting reasons to avoid any tax penalties for not filing the payments correctly or paying enough taxes in the year.
Taxes are complicated enough without adding in the multiple changes from a divorce. To ensure you have relevant guidance for your circumstances and prepare your taxes correctly, seek the professional assistance of a certified public accountant.