Creating and maintaining a happy marriage is complicated. But, divorce is also complicated, and one thing that some do not think about is the tax implications of a divorce. These should be discussed as part of the divorce.
General tax implications
Of course, tax implications are not the most pressing issue people are thinking of during a divorce. But, filing taxes post-divorce can be complicated. Should a couple still file jointly? Who claims the kids? Who gets the refund or how should a refund be split?
Determining one’s filing status will largely depend on when the divorce is completed. If the divorce is done prior to the end of the year (Dec. 31), then a joint tax return is not allowed. Conversely, if the start of the new year begins before the divorce is finalized, filing jointly is allowed by the IRS. Of course, there is always the options of filing as married filing separately. Filing jointly is usually the better option because the standard deduction is much larger for joint filings.
Claiming a child
Though, even if a joint return is not possible, filing as head of household would give a much larger standard deduction than a normal single filer deduction. However, filing as head of household means that one will need to claim a child, so in a shared custody relationship, this will need to be decided prior to filing taxes.
Child support and alimony are treated differently by the IRS. Child support payments have never been deductible. And, if one receives child support, there is no requirement to report those payments as income.
Unfortunately, only divorces finalized before January 1, 2019, can still qualify to deduct alimony payments. This used to be a huge consideration for high-asset divorces, but not so for newer divorces. On the other side, alimony payment for divorces finalized before January 1, 2019, also qualify as income.
Long story long, post-divorce taxes are complicated and divorce related tax disputes for wealthy individuals are common. This is why it is so important for Washington, D.C., metro area residents to contact an attorney immediately when they are thinking about divorce.