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How to prepare your taxes after a divorce

On Behalf of | Mar 18, 2023 | Blog, Divorce |

Divorce can fundamentally alter how you prepare your taxes. From changing your filing status to accounting for child and spousal support payments, there are many new issues you must consider after your divorce.

Understanding how divorce impacts your tax situation can help you avoid costly mistakes.

Filing status and divorce

Regardless of whether you and your spouse filed your taxes jointly or separately, you need to modify your filing status after divorce. For tax purposes, your marital status on December 31 generally determines your status for the year. Starting with the year of your divorce, you can begin filing as single. In some cases, separated people can file taxes as head of household. You should also look into updating your withholding status if you are an employee who receives a W-4 tax form, as it can change after your divorce as well.

Assets and payments

The separation of assets like retirement accounts, investments and real estate can affect your tax preparation also. For example, you could have to pay capital gains taxes on securities. In addition, if you need to sell your home, there could be additional taxes on the gains from the sale. If possible, you and your spouse should consider the tax implications of splitting certain assets before you finalize your divorce.

Alimony and child support payments are not deductible and do not count as income for the recipient. However, if you share custody, you and your spouse need to determine who claims your children as dependents when filing taxes.

Divorce can seriously alter your financial situation, including how your file and pay taxes. Fortunately, there are steps you can take during and after divorce to avoid unnecessary costs.