No one wishes for a divorce. But if it happens to you, are you prepared for the tax impacts that a divorce can have?
You will have to reconsider your filing status, for one thing, and perhaps even your withholding may need to be adjusted.
Alimony & Child Support
In your planning, you should be aware that qualifying alimony payments that you make may be deductible, but child support is not. (Along the same lines, you may have to report alimony, but not child support you receive as taxable income.)
If you have children, the question of which parent can claim deductions, childcare and education credits and the many other items related to dependents needs to be resolved. In addition, you will have to address potential changes in your health insurance premium tax credit allocation or any loss of your health care coverage due to divorce.
Retirement & Social Security
And if there are retirement assets that you and your soon-to-be-ex-spouse share, those will probably have to be divided and there can be tax ramifications. You should also be aware of the social security matters in play.
Tax concerns aren’t at the top of anyone’s agenda when they’re dealing with a divorce or separation, but we can offer personalized advice that will help minimize the stress of dealing with tax issues in the midst of significant change. Be sure to contact our office with all your questions on the tax effects of divorce or separation.
And in case you need one, or know someone who does, remember that Sue is a Certified Divorce Financial Analyst (CDFA). She can help you navigate the financial complexities of divorce. Feel free to call her with your questions or concerns at any time: 239-872-8490.