Managing the Tax Effects of Divorce or Separation

Managing the Tax Effects of Divorce or Separation

What impact can a divorce or legal separation have on your tax situation? You may be surprised to learn about the many areas that these major life events can impact, including your taxes. You will have to reconsider your filing status, for one thing, and perhaps even your withholding may need to be adjusted. In your planning, you should be aware that qualifying alimony payments that you make may be deductible, but child support is not. (Along the same lines, you may have to report alimony, but not child support you receive as taxable income.)

If you have children, the question of which parent can claim deductions, childcare and education credits and the many other items related to dependents needs to be resolved. In addition, you will have to address potential changes in your health insurance premium tax credit allocation or any loss of your health care coverage due to divorce.

Tax concerns aren’t at the top of anyone’s agenda when they’re dealing with a divorce or separation, but we can offer personalized advice that will help minimize the stress of dealing with tax issues in the midst of significant change. Be sure to contact us with all your questions on the tax effects of divorce or separation.