The CDC reported that in 2022, Georgia had 11 divorces per 1,000 residents. Many of those divorces involved complicated financial discussions about assets, children and alimony payments. However, divorce brings about financial changes that extend beyond property division and spousal support.
If you are going through a divorce, it is understandable that tax considerations may not be at the forefront of your mind. Nevertheless, a change in marital status can significantly impact your tax situation, and it is important to understand how it can affect you.
Change in filing status
One of the first changes you will notice post-divorce is your tax filing status. If the courts finalize your divorce by the last day of the tax year, you will file as single or head of household rather than married. This can change your tax bracket and the amount of tax you owe.
Division of tax credits and deductions
In a marriage, couples often share tax credits and deductions. After a divorce, you must divide these benefits. For instance, if you have children, only one parent can claim them as dependents for tax purposes.
Spousal support and child support
Spousal support and child support can also have tax implications. As of 2019, those who pay alimony can no longer deduct it from their taxable income, and those who receive it do not need to report it as income.
Sale of the marital home
If you decide to sell your marital home during or after a divorce, you may face capital gains tax on the sale. However, you may qualify for an exclusion that could reduce or eliminate the tax.
Understanding the tax implications of a divorce can help you avoid unexpected financial complications. As you navigate this challenging time, keep these tax considerations in mind to better prepare for your new financial reality. Remember, a sound approach to your post-divorce taxes can help you maintain financial stability in your new life stage.
