As someone who is getting a divorce, you have a lot on your mind, such as child custody and support, spousal support, asset and debt division. Taxes on the other hand, may be the furthest from your mind but they shouldn’t be. As you dissolve your marriage it’s important to consider the tax effects of divorce, and how it impacts your wallet.
Factors such as name change and spousal support for example, can influence different aspects of your taxes. That being said, here are some important tax considerations you need to keep in mind now that you’re getting a divorce:
Child Support. Are child support payments tax deductible? No, they are not. They are not taxable either.
Paying Spousal Support. If your divorce decree says you will pay your former husband or wife spousal support, you can deduct alimony paid to your former spouse, regardless if you itemize deductions. However, if your divorce decree doesn’t say you need to pay spousal support and you give your former spouse money voluntarily or pay their bills outside of the divorce, these payments are NOT tax-deductible; it has to be in the divorce decree.
Receiving Spousal Support. If you receive spousal support, it is taxable in the same year you receive it. “Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty,” according to the Internal Revenue Service. You can do this by making estimated tax payments or by increasing the amount of tax that is withheld from your normal wages.
Contributing to Your Spouse’s IRA. If your divorce is finalized by the end of the year and you contributed to your spouse’s traditional IRA, unfortunately you cannot deduct those contributions. However, you can deduct any contributions you made to your traditional IRA, according to the IRS.
Changing Your Name. If you decide to change your name after you get divorced, don’t forget to notify the Social Security Administration (SSA) and file Form SS-5, Application for a Social Security Card. If you fail to notify the SSA and the name on your tax return doesn’t match the SSA’s records, it can cause processing problems and a delay in your tax refund.
We sincerely hope this post clears up a few questions you have about divorce and taxes. For divorce representation in Las Vegas, contact Leavitt Law Firm today!