There is a lot of discussion over the various kinds of asset division in a high-asset divorce, but one of the topics that divorcing couples know less about is taxation after a divorce. As you go through a divorce, you may be more concerned with the emotional impact of that process on yourself and your children to consider how your tax responsibilities may change. However, it would help if you familiarized yourself with how your property and payments are taxed following a divorce.
How are property and payments typically taxed?
Given the enormous emotional toll of a divorce, you may avoid the reality of these tax implications as just another burden. Despite this, you should avoid any surprises that could have a negative financial effect following your divorce. Here are some of the ways your taxes may change:
- Those who pay alimony can no longer deduct it from taxable income.
- Those receiving alimony have to include this in their taxable income.
- Regardless of their temporary or permanent status, child support payments may not be deductible for the payor.
- A custodial parent receiving child support may not have to treat those payments as taxable income.
- The custodial parent could claim a dependency exemption for some or all of the children. Parents can agree to share or switch off on this exemption.
- Divorcing spouses may be able to file taxes as ‘married’ though filing separately.
Protecting your interests in a divorce
If you’re going through a divorce, the tax implications can be very confusing. Very few people have the expertise necessary to navigate their post-divorce taxes. Immerse yourself in the resources available regarding this challenging transition.