Tax Implications of Divorce

 Posted on September 29, 2016 in Divorce

When you are considering divorce, it is important to think about all the consequences that a divorce might bring. One of the major aspects to think about involves the tax implications of divorce. Indeed, it is important to understand some of the tax implications of a divorce, but there may also be exceptions or specific sections of tax law that may apply to your specific situation that are not mentioned here. The best way to find out exactly what tax implications you should be aware of is to talk to a skilled divorce attorney who is knowledgeable about the tax implications of divorce.

Filing Status

One of the most obvious tax consequences of divorce is that it can have a big impact on filing status. If you are officially divorced by New Year’s Eve, then you have to file as either single or head of household. If your divorce decree has not been approved by the judge at that time, then you can file either as married or married filing separately. Depending on your situation it may make sense to wait to file until the next year, or, in some cases, you should make sure that you file before the year is up.

Maintenance

Sometimes during and after a divorce, one spouse is court ordered to pay the other spouse maintenance. The spouse who is receiving maintenance is responsible for paying the taxes on it. The spouse that pays is able to deduct the payments from his or her total taxable income and the person that receives the payments needs to report those payments as income on his or her taxes.

Health Insurance

The health insurance implication of divorce on taxes is relatively new. This comes from the Affordable Care Act, colloquially known as “Obamacare.” This act mandates that people have health insurance coverage or they may be liable for a tax penalty. Many people access health insurance through their spouse so a divorce will often mean that one spouse loses health insurance. If the spouse that is losing health insurance does not have coverage through his or her employer, then he or she needs to get coverage through the health insurance marketplace.

IRAs

Some contributions to your own or your spouse’s IRAs may be tax deductible during your marriage. However, after your divorce, the other person will no longer be your spouse and therefore any contributions you made to his or her IRA after the divorce will not be tax deductible.   

DuPage County Tax Consideration Divorce Attorneys

If you are thinking about a divorce you should get all the information that you need about taxes and other financial considerations to make sure that you are aware of all the consequences of different outcomes. Our DuPage County tax consideration divorce attorneys at Davi Family Law, LLC can help you understand the tax considerations with your divorce.

Source:
http://www.kiplinger.com/article/taxes/T065-C000-S001-tax-planning-for-divorce.html