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Will your divorce affect your taxes?

On Behalf of | Feb 14, 2020 | Divorce

If you and your spouse are nearing divorce, you are probably already trying to figure out what your future will look like. You will undoubtedly have many concerns about your finances, and this is common. Even if your marriage lasted only a few years, you may have been used to living off two incomes and sharing the expenses of the household. Now, you will be handling these things on your own.

You will want to be sure to obtain the fullest, fairest asset division possible since this will greatly influence your successful transition into your new life. However, don’t forget about a very important financial concern that many divorcing couples overlook, and that is your taxes.

Common tax considerations

Tax ramifications from a recent divorce can be a shock if you do not consider them during your negotiations or divorce trial. Some unavoidable events can drastically impact your tax returns. However, a skilled attorney may be able to help you take advantage of the options that may improve your tax results and avoid the negative impact on your taxes including any of the following situations:

  • Selling your home, which may result in capital gains
  • Dividing your retirement accounts, which may incur taxes or even penalties
  • Liquidating other assets to divide the value
  • Incurring legal fees for your divorce, which are no longer tax deductible
  • Paying child support, which may not allow you to claim your child as an exemption
  • Supporting a child under age 17, which may qualify you for tax credits

Taxes after divorce can be quite complex, especially if your settlement or court order includes spousal support. Because of recent changes in tax laws, a spouse who pays alimony may no longer deduct this expense on his or her taxes. However, if you receive spousal support, you do not have to claim it as part of your income.

Further complications may arise if you receive spousal support from an IRA deduction. If this is the case, you may be liable for paying the taxes on the alimony you receive. However, a spouse may not deposit spousal support funds into an IRA. Because of this, it will be important for you to make alternative plans for your retirement fund. Fortunately, your attorney may be able to help you by assessing your goals for the future and working for a settlement or divorce order that is in your best interests.

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