Divorce is difficult even under the best circumstances, and there are plenty of life adjustments to be made. From finding new living arrangements to figuring out a new schedule for your children, there are many things to consider after a divorce. Amidst all of this, you probably aren’t thinking about how filing taxes will be different after the divorce, but it’s certainly something you should consider.
Declaring a New Tax Status
Once your divorce is finalized, your tax status will likely change. You may have been filing as “married filing jointly” previously but now need to change it to “single” or “head of household” in the next tax year. When doing this, you need to keep in mind that your filing status will be determined by the date your divorce was finalized. If it’s finalized after the last day of the tax year, you may need to file jointly or file your own as “married filing separately.”
The Benefits of Filing Jointly While Separated
If you’re going through a period of separation from your spouse, you may be wondering what this means for your taxes or how you should file them. You may think the obvious choice is to file separately since you’re going through a period of separation, but you may be hurting yourself if you do this. There are pros and cons to each, but if you are amicable with your spouse and can file jointly, it can make things much fairer for everyone involved.
If you choose to file jointly, you will be able to take advantage of many of the same tax credits and deductions that you would have had throughout your marriage. Everything should stay the same as it was before you were separated, so it should be fairly straightforward to file your taxes and know what you’re getting back. If you file separately, the amount may be notably different than it would be if you file jointly.
Additionally, filing jointly can be extremely beneficial for both parties if children are involved. If you’re filing separately, only one parent can claim the child for a tax credit. This means that the other parent won’t be able to claim the child on their tax returns and won’t be eligible for the child tax credit. This can make a big difference in the amount you receive in your tax return and could be incredibly unfair to the parent who does not receive the tax credit.
Not every separated couple is on good enough terms to file jointly, though, and that’s understandable. There are also benefits to filing separately, such as keeping your tax liabilities separate. You have to figure out what will work best for your scenario to know how you should file your taxes.
Child Tax Credits
Additionally, you will also have to figure out who will receive the child tax credits. If one parent has sole custody over the child, it’s likely that they would receive this credit, but there are certain circumstances and situations that allow for the noncustodial parent to claim it. Some couples even choose to alternate who uses it each year.
Property & Business Ventures
There are a few other situations to be aware of if you’re going through a divorce. If property is being transferred between spouses or ex-spouses, it is a nontaxable event. Likewise, if the couple owns a business together and one spouse buys out the other or they continue to co-own the business, it is a nontaxable event. But if the business is sold to a third party, it could end up being a taxable event. Furthermore, alimony payments are also no longer taxable as of 2017.
When to Involve a Divorce Lawyer
Divorce is difficult enough as it is— you don’t want to add issues with the IRS to your struggles. If you’re unsure where to turn or what steps you need to take in your divorce, the Law Offices of Daniel J. Miller can help.
Whether your divorce is complicated or simple, you will benefit from having one of our experienced family law attorneys on your side. If you’re in need of representation, give our office a call today at (757) 267-4949 or contact us online.