A divorce is not only an emotional event, it is a financial event. As the year ends, people often focus on tax implications of divorce. Being planful and mindful of taxes may benefit both spouses moving forward. Having a good collaborative team can help you work through tax issues and make the best financial decisions possible.
Here are some things to think about regarding taxes and divorce:
If you are still married on December 31, you can file your taxes jointly as married–even if you are divorced by the time your taxes are due. You may want to work together to determine the best overall tax scenario and work together to save the family the most money possible in a given tax year.
- You may want to include language about the tax consequences for your last year of marriage in the decree. Clarifying that any liability or refund for that year is shared, could save you effort later in the year when one or both of you have a claim to the other’s refund/liability.
- The IRS does not care about the specifics of your property division. Unless it is explicitly in the decree, the IRS will not consider whether one of you received more property in exchange for less tax liability. The IRS operates on its own and you should obtain attorney advice on tax liability before finalizing the divorce.
- You may want to look at the tax implications of filing as Head of Household v. Single post-divorce. Who will claim the dependent exemptions? Do the exemptions need to accompany other benefits claimed such as healthcare reimbursement or child care benefits? Taking the time to think through these issues before finalizing the divorce could save you time and money later.
Because the ramifications of financial decisions can linger long after a divorce is finalized, it is important that you work with an attorney who is experienced in divorce and financial issues so that there is less likelihood that you will have later financial questions. The collaborative process allows for open and thorough examination of tax issues and financial impacts down the line.Tagged with: Collaborative Divorce • divorce and taxes • financial planning