Divorce affects so many aspects of a person’s life. One of them includes taxes, which may come as an afterthought compared with bubbling up emotions, child custody matters and claims to assets that surface.
However, tax issues remain critical. Do not overlook them. Having a clear understanding of post-divorce matters such as your filing status and claiming children as dependents is essential.
Filing status and W-4 forms
Here are some of the tax-related issues that require attention after a divorce:
- Filing status: If the divorce takes place before the end of the year – Dec. 31, a person may file taxes as either head of household or single taxpayer. If you choose the former, you must have a “qualifying person” such as your minor child living in your home for more than six months of the year. In addition, as head of household, you must have paid for more than half of your home’s maintenance during the year. Remember, though, that if your divorce does not become final by the end of the year, you have the option to file jointly with your spouse or separately as a married person.
- Who claims the children as dependents?: An easy solution to this scenario is for parents to alternate each year as to who may claim the minor children as dependents in their tax filings. For example, some divorce agreements may stipulate that one parent claims the children during even years, while the other parent claims them during odd years.
- Updating the W-4 form at work: Employers rely on W-4 forms to know how much money to withhold from the paychecks of employees. As a divorced person, you should adjust the allowances. If not, you may find that you have either overpaid taxes or not paying enough. For the latter scenario, you may get a larger-than-expected tax bill.
- Alimony issues: The guidelines on this have changed. If the divorce took place on or before Dec. 31, 2018, a payer spouse may deduct alimony on his or her taxes, while the spouse who received alimony is required to include it as income. These rules do not apply to divorces that occurred on or after Jan. 1, 2019.
- Child support matters: Child support payments cannot be deducted by paying spouses. Inversely, such payments are not taxable for the receiving spouse.
Having a firm understanding of these issues will help you during this life transition. A skilled legal professional can provide important guidance, too.
Tasks that protect you
Addressing the many details related to divorce is vital and will help you as you focus on a new chapter in your life. Tax matters are among these details that require attention. Complete the necessary tasks that will protect you.