During divorce, you may feel like your life has been flipped upside down. Changes can happen on every level including where you live, how much money you make and even how often you get to see your children. The last thing you’re probably thinking about is taxes during divorce, but it can also have a big impact in this area!
Filing Your Taxes
Filing your taxes will look different the year that you’re divorcing. While most married couples file their taxes jointly, things change when there is a separation or a divorce. If you become separated during the year, you and your spouse may still choose to file jointly. There are some benefits to this but also some drawbacks. The biggest of which is that you will both still be responsible for any taxes owed. For this reason, many separated couples choose to file separately. One spouse can file as the head of household, but the other will need to file as married filing separately. This can help break up any tax requirements of the other party and can be helpful if you are already not sharing a bank account.
Before you file your taxes during divorce, you will want to have some protections in place. This can mean something as simple as getting a different bank account than what your spouse has or something as complicated as having a tax liability agreement put into place. What you do to protect yourself depends on your personal position, the amiability of the divorce and any agreements that you might already have during your divorce. Talk with both a tax professional and a divorce professional to make sure that you are clear about how you’re going to protect yourself while filing your taxes.
Your Divorce Agreement
When you’re filing for divorce, there are many financial aspects of the relationship that you’ll need to include in your divorce agreement. Do not forget about any tax liabilities that you have during the divorce. Including these in your agreement will allow both parties to know what they are responsible for. It can also protect you if your spouse came into the relationship with tax debt or if they accrued a large amount of tax debt. You may need to use your divorce professional to negotiate some of these things, but it can be helpful to have them already in an agreement. Once they are in the agreement, they must be held when it comes time to file your taxes.
In the past, it was possible to write off certain divorce expenses on your taxes. People who knew about this before may mistakenly think that they can still do this. When you’re claiming deductions from your taxes the year that you’re divorced, do not include things that could be related to the divorce. It is also important to note that you can no longer deduct child support or alimony from your expenses when you file.
If you have children with your spouse, they are often one of the biggest topics in the divorce. In addition to matters like custody and child support, you must also determine who will be claiming them on the taxes. Many divorcing couples take the approach of “splitting up the children.” There are many scenarios for this situation. You could split up the children and each spouse claims a predetermined child or children. You may also choose to take turns claiming them from year to year. Another situation that is common is that the custodial party always claims the children. Seek professional assistance on the best scenario for your unique situation.
Find a Tax Professional
Even if you’ve filed your own taxes before, things can get complicated with taxes during divorce. It’s always best to make sure that your taxes are handled the correct way and that you are not at risk of losing money or worse. Hiring a tax professional may seem like an expense you just don’t need, but expert advice can be helpful with filing taxes after a divorce. Your tax professional will be able to guide you on whether you qualify for additional money, if you’re going to have to pay more and if there is anything the other party is liable for. Keep in mind, though, that your taxes should go back to being uncomplicated during your first full year after divorce!
In addition to tax questions, you may have other questions related to your money during divorce. Your divorce likely involves major changes to your monetary situation. For all of your money-related divorce questions, let Wiser Divorce Solutions help!