A divorce affects so many aspects of a person’s life. As a result, some things may get overlooked. One such matter pertains to taxes. With tax season here, a person who recently divorced or is in the midst of divorce must make a careful review as to how his or her new or pending status affects them.
Tax-related matters need prompt attention, and adjustments become necessary for a divorced person. Implementing specific changes may make all the difference between having to pay more in taxes to the IRS or receiving a refund.
Filing status and dependents
Here are some tax-related issues that any divorced person should address:
- Your filing status: As long as the divorce agreement occurs before Dec. 31, a person may file as either a single taxpayer or head of household. For the latter, you must have a “qualifying person” such as your child living with you for more than half the year and you paid for more than half of the home’s upkeep during that year. Meanwhile, if the divorce is not final by the end of the year, the person may either jointly file taxes with the other spouse or file separately as a married person.
- Claiming your children as dependents: In certain divorce agreements, some spouses choose to annually take turns as to which parent claims the child as a dependent. One spouse may claim the child during odd years, while the other claims the child during even years.
- Updating W-4 form: Employees file this IRS document, so their employers know how much money to withhold from their pay. Divorced people should adjust their allowances. If not, they may find that they have overpaid their taxes or find themselves owing a big tax bill.
- Alimony matters: Alimony provided by the payer spouse is deductible as long as the divorce agreement occurred on or before Dec. 31, 2018. The spouse who receives the payments must report them as income.
- Child support: Such payments are not deductible by the paying spouse nor are they taxable for the receiving spouse.
Make sure to address these issues after a divorce. Money matters make a big difference.
A new beginning
A divorce marks another new beginning. This new stage in your life requires attention to new details such as tax-related issues. Carefully review what needs to get done. Accomplishment is only a few steps away.