Divorce changes so many aspects of your life, it can be hard to keep up with them. One area that you need to be aware of this time of year is taxes. Getting a divorce has multiple effects on taxes, especially when it lasts through two calendar years.
You need to know how divorce influences how you file for taxes, whether you do them yourself or hire an accountant, so you can properly prepare for the changes.
You may have to update your name, address, place of employment and financial accounts to prevent confusion that can lead to penalties and delays in your tax return. Update all changes to your personal information to make things easy for everyone.
Taxes come from all sources of income, excluding child support. This means that if you pay child support, you cannot use it as a deduction. If you receive child support, it will not count as income. However, if you pay alimony (spousal support), you can claim it as a deduction, and you will need your ex’s Social Security number to do so. If you receive alimony, it may be subject to taxes, but not through withholding, so adjust tax payments accordingly to avoid a fine.
This is where things get complicated. The distribution of marital assets and what you do with them have immediate and long-term tax consequences for both of you. It is best to understand what they are during the property division stage to ensure you do not end up losing money in unexpected tax fees.
Think you can automatically claim your children as dependents? Think again. Only the custodial parent, the one with whom the children spent the most nights, can. If you both had exactly equal time with the kids last year, then the right to claim dependents applies to whoever has the higher adjusted gross income.