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How Divorce Impacts Income Taxes

You’re probably not thinking much about your taxes when going through a big life change like divorce. But if you’ve recently been divorced or are going through a divorce, it can actually have a big impact on your taxes. Below are some important things to consider about the effect on your taxes when you file for divorce in Jacksonville.

Your Filing Status

Your filing status is the most obvious change on your tax return after getting a divorce. It’s also what determines many of the numbers on your tax return, such as your tax bracket, deductions, and exemptions. The impact your status has on your tax liability will depend on your own personal situation. Some people who file for divorce in Jacksonville may find they owe more in taxes, others may owe less.

Whether you file married or single will depend on your marital status on the last day of the tax year—December 31. The IRS will only consider you unmarried if your divorce is finalized by that date. Following a divorce, many people use the single filing status. If you have a qualified dependent residing with you, however, you may file as head of household.

Child Support and Alimony

It’s important to know how child support and alimony may impact your taxes when you file for divorce in Jacksonville. Child support is a payment made to the custodial parent by the noncustodial parent. These payments are not tax deductible for the parent paying them, nor are they taxable for the parent receiving them.

Alimony that you pay is tax deductible, even if you don’t itemize your deductions. However, any voluntary payment that you make outside of a divorce or separation decree is not deductible. Due to changes in tax laws, alimony beginning after December 31, 2018, will not be deductible.

If you received alimony payments before December 31, 2018, these payments are considered taxable income and must be included as income when you file your tax return. It’s not subject to tax withholding so it might be necessary to increase the amount you pay during the year to avoid penalty. After December 31, 2018, alimony will not be considered income.

Family Tax Breaks

For families who still have children qualifying as dependents, a big question will be which parent claims them as exemptions. The parent who has primary custody of the children (more than 50% of the time) is eligible to claim them as exemptions.

These exemptions mean a reduction in taxable income and lucrative child tax credits. In some cases, a custodial parent’s income may be too high to truly benefit from claiming the exemptions. In these situations, the spouses can agree to trade or release the exemption.

Splitting Joint Payments

For spouses who have made jointly estimated tax payments in the divorce year, there are a couple of options. Either one of you may claim all payments, or you may agree on a way in which to divide them. When an agreement can’t be reached, the estimated tax you may claim is calculated by multiplying the total estimated tax paid by the tax shown on your individual tax return. That gets divided by the total tax shown on both spouses’ return for that year.

Jacksonville Divorce Attorneys

Taxes can be a big part of the equation if you plan to file for divorce in Jacksonville. Make sure you speak with an experienced law firm like Parker & DuFresne. Our attorneys will help you understand the financial implications of your divorce, including the impact on your income taxes. Call to speak with us today at (904) 733-7766.

Parker and DuFresne

Parker and DuFresne