5 Things Every Person Should Know About Divorce and Taxes

Posted by: Gerald A. Maggio, Esq.

Divorce mediators Orange County; California Divorce MediatorsDid you just get a divorce? If your divorce was finalized a few months back, the headache of filing for taxes may have already fallen upon you. New divorcees will get to experience all of it for the first time, i.e. filing tax returns and dealing with new tax issues.  Here are five things to know to reduce the anxiety that comes with filing taxes:

1.     Figure Out Your Filing Status

Determine the date the judge finalized the divorce. If your divorce was finalized by midnight on December 31st, you will generally have to file your tax returns separately.  If your divorce judgment was entered after January 1st, you have the option of filing “married filing jointly” (if your spouse is agreeable and it makes sense to do so) or “married filing separately.”  If you share custody of your children, you will generally get to claim head of the household status.

2.     Child Support Payments vs. Spousal Support Payments

It is very important to know that people who pay alimony are entitled to write those payments off as a tax deduction, and those receiving spousal support must claim it as “income” on their tax returns.  Therefore, both parties should plan their tax obligations accordingly.  On the other hand, those paying child support cannot claim such payments on their taxes as a deduction, and those receiving child support do not need to report such payments on their tax returns.

3.     Determine Who Gets the Child Exemptions

During divorce proceedings, you and your partner can decide on who gets qualified to claim the child/children as tax exemptions. If you have joint custody (i.e. 50% each), then generally you should agree to alternate the right to claim the tax exemption each year.  Otherwise, the party who has over 50% custody gets to claim the child as a tax exemption pursuant to the IRS Code.

4.     Change Your Withholding on the W-4 Form

You can claim extra tax exemption on your W-4 form through your employer to offset the tax deduction for spousal support payments you are making, leaving you with more net income each month.  On the other hand, people who receive alimony payments can ask their employer to withhold additional taxes from their paycheck to cover their new tax liability.

5.     Review the Legal Fees

If you filed for divorce using the litigation method, you might have significant legal fees incurred.   Unfortunately, most legal fees are not tax-deductible, but fees that you paid for advice regarding taxes are.

To learn more about the divorce process in California and how mediation can help, please visit our page, “What is Divorce Mediation.”