As many Massachusetts residents discover, the process of ending a marriage may be temporary, but taxes are forever. Divorce brings with it many financial adjustments, and tax changes are not the least of these, with implications lasting long after a divorce is finalized. There are four main areas that divorcing or recently divorced individuals will want to consider, including filing status, dependent deductions, asset transfers and spousal support.
When it comes to post-divorce taxes, the first item on the agenda is determining filing status. If the divorce was finalized on or before Dec. 31 of the previous year, both individuals may file separately. Those who are only separated or in the midst of divorced proceedings but not yet legally divorced have two options. Divorcing couples can choose to file jointly one final time or to file as married filing separately.
Couples who share children will need to determine who will claim the kids as dependents, though generally, the custodial parent claims the dependent child. Dependent tax deductions may also include the issue of the children’s medical bills, as whichever parent pays these expenses can include the cost as a deduction regardless of whether he or she is the custodial parent. Although many of the issues surrounding asset taxation should have been settled during the divorce proceedings when jointly owned assets were sold, complex situations may still arise. If, for example, assets were divided rather than sold, the asset-owning ex-spouse may wish to discuss the issue of capital gains taxes with a professional.
Under the current tax law, spousal support payments are tax deductible for the payor, and the recipient has to claim the income on his or her taxes. However, if recent proposed changes to the tax law go into effect, this will no longer be the case, and both payee and payor will need to keep this in mind. With such high financial stakes, it makes good sense to determine as many monetary details as possible during the proceedings with a knowledgeable Massachusetts family law attorney so that there are no unpleasant financial surprises – of the tax variety or otherwise – after the divorce is finalized.
Source: foxbusiness.com, “Divorce and taxes: the main considerations“, Leia Klingel, Feb. 2, 2018