by David P. Badanes, Esq.

How Does Divorce Affect Taxes?

If you are getting divorced or thinking of getting divorced, in addition to hiring a divorce attorney, you should consult with an accountant or tax expert.  Here are some of the tax issues involved with a divorce.

December 31 is the date the IRS considers:  When you are legally divorced is probably going to be different as to when the IRS considers you to be divorced when filing your tax return.  You are legally divorced when the Court signs the Judgment of Divorce.  For tax purposes, the IRS uses December 31 as the date to determine if you are divorced or not when filing your taxes.

For example, if your Judgment of Divorce was signed on December 30, 2020, then that is the legal date of your divorce and when filing your 2020 tax return you can state that you were divorced in 2020 – even though you were only divorced for one day in that tax year.  In comparison, if your divorce came in a few days later, and your Judgment of Divorce was signed on January 2, 2021, then you are considered married for the 2020 tax return.

Individual or Joint Return.  If you are not legally divorced, then you have the option to file an individual tax return or a joint tax return with your spouse.  Even if your divorce is not final, you have the right to file a separate tax return and you do not need the Court’s or your spouse’s permission to file an individual tax return.

However, if you file an individual tax return, then if that causes your spouse to pay more in taxes than if you filed a joint tax return, it is possible that a Court may make you pay the difference in taxes between filing a joint tax return and an individual tax return.

It is important to note, that in most situations, if you are still “married”, that a joint tax return will result in you and your spouse paying less in taxes and therefore receiving a larger tax return than if you both file separate tax returns.

Copy of Prior Tax Returns.  Prior to your divorce, you probably filed joint tax returns with your spouse.  You have an absolute right to get a copy of all tax returns.  You can ask your accountant to provide copies of your prior tax returns.  You can also go to irs.gov (specifically: https://www.irs.gov/newsroom/heres-how-to-get-prior-year-tax-information ) for more information on how to get a copy of your prior tax returns.

Prior Tax Return Issues or IRS Debt.  If, you owe the IRS taxes from past tax returns, in the divorce, most likely that debt will be distributed such that each party takes on 50% of the IRS debt.

If one party is audited or if the IRS finds issues with a prior joint tax return, your divorce agreement should specify that in those cases that party is the only one responsible for any tax penalties.

Children Issues:  After the divorce, if there are children, then it must be decided which spouse will get the tax exemption (i.e., claim the child as a dependent) on their tax return.  This can be done by an agreement between the parties or the Court can order which spouse gets the tax exemption.  Only one parent can claim a child on their tax return.  However, if there are more than 1 child, you can decide that each parent gets to take 1 or more children on their tax returns as a dependent.

It is important to note that here are many tax credits that may be available to a parent who claims a child as a dependent, for example, the Earned Income Credit is a credit that is sometimes available to parents.

Child Support:  If you are paying child support, child support is not deductible on your income.  If you are receiving child support, then the amount of child support received is not considered income.

Spousal Maintenance (Alimony):  Due to the changes in the tax law, spousal maintenance (alimony) is no longer available as a deduction from your income (or considered as income for those who received alimony).

Property Transfers:  During or as a result of a divorce, any transfers of property, real or personal property, are typically non-taxable transfers.  However, when the transfer is made the property retains its “cost basis.”  This is a complicated tax issue that is best handled and explained by your accountant.

David Badanes, Esq. and the Badanes Law Office, P.C. has helped numerous clients in their divorce.  The Badanes Law Office makes sure you understand the different tax consequences that occur in a divorce.  If you are thinking of getting divorced, call David Badanes and the Badanes Law Office today at 631-239-1702 or email at david@dbnylaw.com.

The Badanes Law Office has offices in Northport, Suffolk County and Garden City, Nassau County.

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