If you’ve gone through a divorce, you know your world gets turned upside down. Put together divorce and taxes and the complexity can feel overwhelming.
There are a lot of challenges you're facing – the confusion, the uncertainty, and the worry about making the right decisions.
In the midst of this upheaval, having someone in your corner to help you navigate your finances and tax standing with confidence is breath to your lungs.
That’s one of the goals of this guide — but I’m here to sit down with you at any time to discuss the tax logistics of your divorce as well.
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Here’s a practical, 6-step guide to help you navigate things with greater ease and understanding.
1. Filing status: Your first step
Your filing status depends on your marital status as of December 31. If divorced by that date, you cannot file jointly. If still married, you have the option to file jointly or separately. For 2023, the standard deductions are $27,700 for joint filers, $13,850 for singles and married filing separately, and $20,800 for heads of households.
2. Update your W-4
Once you're divorced, it's crucial to update your W-4 form with your employer. This form determines your tax withholding based on your marital status. After a divorce, your tax situation changes, and updating your W-4 ensures that the correct amount of tax is withheld from your paychecks.
3. Child support and dependency
Child support payments are neither taxable income nor tax-deductible. However, determining which parent claims the child as a dependent is crucial for tax benefits, such as the Child Tax Credit. The primary custodial parent typically has the right to claim the child, but this can be adjusted based on your divorce agreement.
4. Asset division
The division of assets during a divorce can have significant tax implications. Transferring properties and splitting retirement accounts can trigger capital gains taxes or penalties. Understand the tax basis of each asset and plan accordingly.
5. Legal and professional fees
The cost of legal advice specifically related to tax issues in your divorce can be deductible. However, general legal expenses for divorce proceedings are not.
6. State taxes
Each state has its own set of rules regarding divorce and taxes. This is particularly important for issues like alimony, which can be treated differently for state tax purposes.
Bonus tip: Get expert guidance
Talking to your professional (whether it’s us or someone else) can be invaluable. We can help you make informed decisions and do them in the right way at the right time. This is what we do every day, and we’re happy to do it for you.
Every decision you make at the end of a marriage is also a step towards a new beginning. Finding your footing in a changed landscape, moving forward with confidence and clarity — these can be difficult.
So, getting the right support and guidance on divorce and taxes as you navigate the transition is the difference-maker. We’re here for you… to help you build a strong foundation for the next chapter of your life.
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Your financial well-being matters.,
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001
F - 816-220-2012
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