Divorce and taxes are closely related as the timing and process of a divorce can have long-term tax implications on your finances. If you’re going through a divorce, here are the tax impacts to be aware of:
- Timing and Filing: If the divorce is not finalized by December 31st, you and your spouse are still considered married for tax purposes. You can either file jointly or separately, but filing jointly usually results in a larger return but both parties are liable for any errors. Filing separately holds each spouse accountable for their own taxes.
- Dependent Claims: The parent who has custody of the children for most of the year can claim the Child Tax Credit, but this may not always be the case.
- Transfer of Property/Assets: The transfer of assets in a divorce is usually non-taxable, but selling assets awarded in divorce can have tax consequences, especially for high-value assets or business ownership.
- Transfer of Retirement Assets: Retirement accounts can be significant assets in a divorce settlement and can be transferred without penalty through a qualified domestic relations order (QDRO) issued by a court.
- Alimony Payments: Alimony payments made after January 1, 2019, as part of a divorce agreement are not considered taxable income for the recipient or deductible for the payer.
- Child Support: Child support payments are not taxable for the recipient or deductible for the payer.
Please note: The information provided in this article is for general informational purposes only and is not intended to be and should not be taken as tax advice. Always consult with a tax professional for specific guidance and recommendations related to your individual situation.
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If you are facing a family law issue and need representation, contact the Blacknall Firm today. Our team of experienced family law attorneys is dedicated to helping our clients achieve the best possible outcome in their cases. Let us put our skills and knowledge to work for you.