How does Divorce Affect Taxes?
The tax code is complex; so, don’t make the mistake of using advice from a friend who went through a divorce. Each case is unique, and there are tax ramifications from each. The best practice is to speak with a tax professional to get the best advice to your specific situation.
Still, it may be helpful for you to understand some basics now. Remember that your filing status depends on your marital status on the last day of the calendar year for which you are filing. If still married, your spouse and you must decide together whether to file jointly or separately. When filing separately, it is usually the primary custodial parent who receives the exemption for children as dependents, though the exemption can be released to the other parent. If the exemption is released, the custodial parent may lose head of household status or the tax rebate for children. Doing so will also affect the guideline child support which is based in part on taxes for the parents.
Similarly, support affects income as regarding taxes. A recipient of support need not pay taxes on child support received but must pay taxes on spousal support received. The IRS has specific guidelines on each. For instance spousal support must be in cash and be in accordance with a written divorce decree, separation agreement, or marital settlement agreement.
It is important to understand important tax considerations before you finalize your divorce so you can arrange your affairs rather than waiting until tax time. Contact Sagaria Law today to schedule an initial consultation and learn more from one of our experienced attorneys.