Getting divorced? Here’s what you need to know about taxes
On behalf of Evans & Franklin, Attorneys at Law posted in family law on Monday, October 10, 2016.
Getting a divorce can affect nearly every aspect of your life, including your taxes. There are certain tax-related issues you should be aware of before you sign a divorce settlement agreement so that you can properly negotiate the terms and potentially minimize the taxes you face.
Here are a few key points that the IRS wants you to know:
Changing Your Name
If you decide to change your name after your divorce, be sure that your new name is on file with the Social Security Administration (SSA). The IRS will compare the name on your tax return with the records at the SSA. The processing of your return and your refund may be delayed if there is a discrepancy.
Alimony
If you are receiving alimony as stipulated in a signed divorce agreement, you will have to pay taxes on that income. If you are paying alimony to your spouse or ex-spouse, you can deduct the amount from your taxable income, whether or not you itemize deductions.
Dependency Exemptions
Both parties may choose to negotiate an agreement about who can claim the children on the tax return and reap the tax benefits of the extra exemptions. If an agreement cannot be reached, the parent with whom the children lived more than half the year is allowed to claim them on his or her return.
Child Support
Child support payments that are issued to an ex-spouse cannot be deducted from taxable income. Any child support payments that are received are not considered to be income and are not taxable.
Health Care Law
According to the Affordable Health Care Act, you and your dependents are required to have continuous health insurance coverage. If your divorce results in the loss of your coverage, you can take advantage of a special enrollment period and enroll in a policy through the Health Insurance Marketplace.
Because of your divorce, which qualifies as change in circumstances, you may also be able to receive advance payments of the premium tax credit.
Protect Your Interests
If you are going through a divorce, some of the decisions you will make can have unexpected ramifications at tax time, especially if you and your spouse have shared the burden of taxes over the years.
However, there are steps you can take before your divorce is finalized to ensure that you are prepared for the changes. Consider consulting an experienced attorney to learn more about protecting your interests during the divorce process.
