If you’re thinking about divorce then you have a lot of factors floating around your head. You’ve likely already thought long and hard about who will get custody of the kids, who will pay child support, how your property will be divided, and who will get the house. These are all important factors, but one thing you may not have thought of is what happens with your taxes.
This must be taken into account with any divorce settlement agreement, for a number of reasons. Read on to learn more about specific tax issue and how they can be affected by divorce. Then reach out to Kendall Gkikas & Mitchell at 909-482-1422 to schedule a consultation with an experienced divorce attorney.
How spousal support affects taxes
If there are legal separation documents or a divorce decree in place, and the paying spouse followed that agreement, then any spousal support paid is tax deductible. If that spouse pays extra in addition to the agreement, that amount is not tax deductible. The spouse who’s receiving spousal support will need to pay tax on that income just as they would on any normal wages.
How child support affects taxes
Child support is not tax deductible for the parent paying it. It’s also not taxed as income for the parent receiving child support, and it does not have to be included in their income. However, in some cases it may be used to estimate total income for the receiving parent.
IRAs can pose unusual tax issues
Does your spouse have a traditional IRA that you’ve been contributing to? If you do, you’re not able to deduct those contributions. On the other hand, if have your own traditional IRA then you may be able to deduct those contributions.
What to do if you’re changing your name
If you took your spouse’s name when you married and are now returning to your maiden name, then you must be sure to notify the appropriate government offices, including the Social Security Administration. You’ll need to file a form known as “Application for a Social Security Card,” with your name. If you are owed a refund and you haven’t updated information with the Social Security Administration then you may see a delay in having your money returned to you.
In most cases only one parent can claim the child tax credit
For parents of dependent children, one of the big tax questions if often who will claim the child tax credit. In most cases, only one parent can claim it. However, one exception involves the year in which the parents were divorced. In this case, a noncustodial parent may be able to claim the tax credit. They would need the custodial parent to agree and to sign a form that releases the exemption from them.
Tax issues can be complex
The bottom line about tax issues involving divorce is that they can be complicated. Your best option is to talk to an accounting professional who specializes in divorced spouses. Of course, for your legal needs, Kendall Gkikas & Mitchell is here for you. Call us at 909-482-1422 if you have questions about the legal process of divorce.
