Arizonans: Divorce Can Drastically Affect Tax Filings
For many Arizonans, including those in Tucson, tax season is over. However, it is important to keep in mind that dissolving a marriage may have implications for next year’s tax filing. In fact, filing for divorce may increase a divorcing party’s tax bill. It is important, therefore, to gain a broad understanding of the tax consequences with regards to divorce.
Perhaps the biggest divorce issue tied to taxes is spousal support and child support payments. Alimony, when received, is treated as taxable income, and failing to report it as so may result in serious negative consequences. The party who pays spousal support, on the other hand, can deduct such payments. Child support is neither taxable nor deductible.
Property division can also affect an individual’s tax filing. For example, the $500,000 gain on a couple’s house that can be realized by that couple is sliced by half when a now divorced party files as a single individual. In the event that one party keeps the marital home, then that individual may be able to deduct a portion of mortgage interest payments.
When considering taxes, it is important to note one’s filing status. Though a couple may assume they have to file jointly if they were married for part of the tax year that is not necessarily the case. Instead, an individual’s filing status is determined on their circumstances on December 31. So, as long as one is officially divorced by December 31, he or she can file as an individual.
In the end, these tax concerns can throw another wrench in the handling of family legal issues. Though many attorneys are not tax professionals, they can often help a divorcing individual develop a legal plan that works in his or her overall best interests. A family law attorney can therefore give such an individual the chance to reach an outcome that leaves the party confident in starting his or her new life.
Source: Reuters, “What’s even worse than a divorce? For some, it’s the taxes,” Lauren Young, April 10, 2014