Taxes can already be a complex experience for just about anyone. Going through a divorce brings a lot of changes that people are not expecting in their personal lives but it can also change the way you are filing your taxes from your filing status to what you can and cannot claim.
We have put together a list of the six most common questions that get asked regarding taxes and divorce.
What is my filing status?
Your marital status at the end of the year can help determine what your status is when you are filing. If by December 31, your divorce is finalized, you will be able to file separately as an unmarried individual. If you have children, you may be able to file as “Head of Household” under certain conditions. Otherwise, you would file as single (even if you were married for most of the year.) It is important to consult with a tax professional to decide the best filing status for your situation.
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Do I need to change my W-4?
A W-4 determines the amount of taxes withheld from your paycheck. Your employer will calculate the withheld amount based on what you have reported on your W-4. Typically married people will file together on taxes to be able to receive deductions and commonly a lower tax rate. After you have gone through a divorce, you may consider changing your W-4 to make sure that the amount your employer is withholding will be accurate.
Can I deduct alimony?
According to the IRS, if you are paying or receiving any payment from your spouse, it might be considered alimony for federal tax purposes.
The IRS uses these factors to determine if a payment might qualify as alimony:
- When you are not filing jointly
- You are no longer members of the same household
- The payment is in cash (including checks or money orders)
- The payment is to or for a spouse or a former spouse made under a divorce decree or separation agreement
- The divorce decree or separation agreement does not designate the payment as not alimony
- The payment isn’t treated as child support or a property settlement
While alimony paid is currently deductible for those filing taxes in 2018, the new tax law will eliminate the tax deduction on alimony for anyone who gets divorced in 2019 or later. If you are already divorced or will finalize a divorce in 2018, the alimony paid will generally remain deductible. However, for divorces finalized in 2019 or later, no alimony payments may be deducted. At the same time, the recipient spouse will also not be required to include alimony payments in their income if the divorce is finalized after 2018. Talk to a divorce lawyer to determine the best strategy for your situation.
Can I deduct attorney fees?
Although you cannot deduct legal fees or court costs for getting a divorce, you might be able to deduct expenses that happen as a result of the divorce. You may want to talk to a tax professional to see if this is something you qualify for.
If you are seeking alimony from the other spouse, you may be able to deduct a portion of the legal fees incurred while disputing your alimony rights. This may be claimed as a “Miscellaneous Itemized Deduction” on a Form 1040 Schedule A.
Common questions for people with children
Who claims the child credit and exemptions?
Generally, only one person will claim the child credit and all exemptions. This person usually is the custodial parent.
The custodial parent is typically determined by the number of nights the child slept in the home of the parent or by what is written out in a Settlement Agreement.
Should I claim child support?
Child support payments are not tax-deductible nor are they considered to be taxable income for the recipient. However, either parent may be able to claim the child as a dependent if 1) they are considered the custodial parent that year or 2) if it is written in the Settlement Agreement.
If you need more guidance before you go further with filing your taxes, Rocket Lawyer is here to help. You can ask a lawyer any questions that you may have.