How Getting Divorced Affects Your Taxes

April 12, 2017

One of the biggest questions people often ask as they’re going through a divorce is how it will affect their taxes. It’s a question worth considering, especially if the process of getting divorced spans multiple tax years where you’ll still be technically married but living apart. The IRS only cares what your marital status is on December 31st. For example, when I was going through a divorce, we had filed by year-end but the divorce was not finalized until late January. That meant that by the time we had to file our taxes for the prior year, we were no longer married, but in the eyes of the IRS, we were for that tax year.

If you’re separated from your spouse but haven’t filed for divorce yet, you may qualify to file as “head of household” if you and your spouse lived apart the last six months of the year and you paid more than half the cost of keeping up a home for your child who lives with you more than six months. This generally means you’ll pay less taxes than if you were to use “married filing separately.” This article goes more into the details of filing jointly versus filing separately. Just know that if you file jointly and then your estranged spouse bails on the tax bill, you’re fully on the hook. In my case, we filed jointly because we both ended up paying less taxes and I personally wasn’t concerned that my ex was committing tax fraud.

The decision could also depend on the rules of your state and how your expenses were paid. If you live in a community property state (AZ, CA, ID, LA, NV, NM, TX, MI or AK) and decide to file separately, you generally would each claim one-half of your expenses on your return. If you do not live in a community property state then each spouse only takes a deduction for expenses he or she actually paid. In other words, if you are making the mortgage payment without help from your spouse, you’ll want to figure out which status realizes the full value of the interest you paid.

Once your divorce is finalized, you’ll want to start from scratch in making sure you’re having enough withheld from your paycheck. Don’t have too much withheld either though. You can use the IRS Withholding Calculator to help figure out what changes you may need to make.

Finally, make sure you understand how maintenance (often called alimony) and child support work for tax purposes. Basically, you can deduct alimony paid but not child support. Likewise, if you’re receiving alimony, you have to claim it as income but not if you’re receiving child support. Who gets to claim the kids as dependents on their tax return is something that should be worked out in your divorce agreement and if you’re receiving a significant amount of alimony, you may need to file estimated taxes to avoid any under-payment penalty. For help with that, it’s best to consult a tax professional for customized guidance.

 

10 End-of-Year Tax Tips

December 03, 2014

Are you worried about paying too much in taxes this year? If you wait until you file next year, it will be too late to do much about it. As the 2014 year winds down, you’ll want to note some simple things you can do to reduce the amount of income tax you owe Uncle Sam this year, while planning for the year to come.  Continue reading “10 End-of-Year Tax Tips”

Getting Help From an Unlikely Source

September 04, 2013

When was the last time you looked forward to dealing with the IRS? Most of us only interact with the IRS when it’s time to file our income taxes or respond to a filing inquiry (i.e. an audit). We probably all know someone who has had challenges with the IRS, and hopefully we never fall into that category, but believe it or not, there are several helpful tools and resources this often belittled agency makes available to taxpayers to help them manage their taxes better. Here is an overview of what I consider some of the more useful resources that may be just a click or phone call away: Continue reading “Getting Help From an Unlikely Source”