Divorce. The word no one wants to hear, but is all too common in today’s world. We’ve all heard the stats – nearly 50% of marriages now end in divorce. While taxes may be the last thing on your mind, it is extremely important that you continue to set yourself up for financial success by knowing what changes from a tax perspective when you go through a divorce.
- Child support versus alimony . One is deductible to the person who pays it (alimony), one is not (child support). This means that if you are on the receiving end of alimony, you must claim in on your tax return, but child support is not reported as income.
- Claiming dependents . It should be outlined in your divorce decree who will claim the children as exemptions. Usually, either the parent that has custody. If parents share joint-custody, the parent that has the child the most days out of the year should claim the exemption.
- Your filing status . If your divorce is finalized by midnight on December 31st of a calendar year, both you and your ex-spouse will file separately.
- Update your Form W-4 . As we’ve covered in previous articles, properly filling out your Form W-4 is important! If you are receiving alimony, you may want to increase the amount of taxes withheld from your paycheck.
Remember, you can always use the dual-scenario calculator to help you compare what your paycheck will look like before and after you make any changes to your withholding.
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These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.