When pursuing a divorce, there are dozens of different things to think about. Where will each party live? How will property and debts be divided? Who will get custody of the kids? Will you maintain the same friend group? What else will change?
As you think about the consequences of divorce, one thing that’s important to consider are the tax implications of legally separating from your spouse. Here’s an overview of tax considerations during a divorce in Massachusetts—to learn more, reach out to the Law Office of Heater M. Ward directly. Note that the following is for informational purposes only, and not meant to serve as tax advice.
How Will a Divorce Judgment Impact My Taxes?
The different issues that you resolve in a divorce—such as child support, spousal maintenance/alimony, and division of property—may all have an impact on your taxes. Here’s what you should know about how each affects your taxes:
- Child support. Contrary to what most people may think, child support payments are not deductible by the payor, nor do they count as income for the recipient. As such, child support payments will likely not impact your tax bill at all.
- Alimony. The federal law has recently changed and spousal support payments, which used to be deductible by the payor and taxable for the recipient, are no longer so. This means that if you receive alimony, you do not have to claim it as income, and you won’t pay tax on it. Similarly, if you are the spouse who is ordered to pay alimony, you won’t be able to deduct this from your federal taxes as you previously could.
- Property division. How property is divided in a divorce could impact your taxes. For example, property transfers in a divorce could be subject to income taxes or gift taxes if those transfers don’t meet certain requirements of the tax code. Property division agreements can also increase or decrease an individual’s net worth, and certain property and assets may count as income (for example, consider income earned from investments) or may be subject to taxes (i.e. property taxes).
If My Divorce Doesn’t Finalize Until Next Year, How Should I File—Married or Single?
Another thing to think about is your filing status if you’re getting a divorce or have recently divorced. Remember, you file taxes for the previous year. In 2022, you will file taxes based on your 2021 income. Your marital status at the end of the tax year for which you are filing determines how you will file taxes. For example, if you get divorced in mid-May 2021, then you will file as single on your 2021 returns (which will be due in 2022). On the other hand, if you are legally married on December 31, 2021, then you will need to file as married, even if your divorce finalizes the next day.
Reach Out to Our Massachusetts Divorce Lawyer Today
Tax planning during a divorce can feel overwhelming, but it’s critically important that you understand the financial consequences of a divorce, including the tax ramifications. At the Law Office of Heather M. Ward, our Massachusetts divorce lawyer can help you protect your best interests in a divorce, and help you to make smart decisions related to your finances and taxes in a divorce. To learn more, please call Attorney Heather M. Ward directly today at (617) 903-8955 or send our law office a message online today.