Divorces can be messy and complicated for many different reasons, but one that is often forgotten about is how it impacts your taxes. The first time you need to file taxes post-divorce may be confusing. And unfortunately, there are quite a few details that need to be sorted with your ex-partner before you can file.
Not sure where to begin with filing your taxes this year? Don’t go into tax season post-divorce blindsided. To help guide you through your first tax season solo, AA Tax & Accounting Services has put together a list of tax advice when going through a divorce.
Navigating Taxes When Going Through a Divorce
Divorce can be draining — leaving you with many details to stress over. Filing your taxes doesn’t have to be one of them. Instead, follow these tips for navigating taxes when going through a divorce.
Understand Your Filing Status
Every year when filing your taxes, you need to declare a filing status. Previously, you likely would have been filing jointly with your ex. However, your marital status at the end of the previous tax year will determine how you should be filing. Were you officially divorced by December 31st of the tax year?
If you were divorced before this date, you could file your taxes separately from your ex. However, if you are still in the separation phase and your divorce is not finalized by the end of the tax year, it may be in your favor to file jointly instead of separately.
Navigate the Transfer of Assets
You’re likely working with your lawyers to divide your assets during your divorce. When transferring property assets from one spouse to the other during a divorce settlement, the individual receiving the asset will not need to pay taxes on it at the time of the transfer. However, should they sell the asset later, the individual will need to pay capital gains tax on all the appreciation before and after the transfer.
Consider Exemptions for Dependents
If you have any children together, you will need to determine which partner can claim any children as dependents on their tax return during the settlement process. In situations where each spouse shares custody of the children, the parent which whom the child resides for most of the tax year gets to claim the child as a dependent.
Factor in Child Support and Alimony Payments
When a divorce settlement declares that a spouse must pay child support, it is essential to note that it will not affect taxes. Child support payments are not taxable income for the recipient or tax-deductible for the paying spouse.
However, alimony payments are handled differently than child support. Any alimony payments are considered taxable income for the individual receiving the payment. Similarly, they can be declared as a tax deduction for the spouse making the alimony payment.
Tax Preparation Services in Cedar City, Utah
Divorce can be stressful, but navigating the tax process post-divorce doesn’t have to be. Instead of heading into tax season post-divorce with a million questions circling your head, you can rely on our experienced team to guide you through tax season.
AA Tax & Accounting Services is a full-service accounting firm that can help you navigate the process seamlessly. If you have any further questions about filing taxes after divorce, including alimony tax, divorce tax, and child support, we are more than happy to assist. Our team has spent years serving Cedar City, Utah, and surrounding Southern Utah towns.
Contact us today to schedule an appointment for individual tax preparation.