Are you contemplating getting a divorce? If so, you have a lot to think about. Depending on your circumstances, child custody, child support, spousal support, and property division are probably at the top of your mind. Taxes on the other hand, may be the last thing you’re thinking about. However, if you decide to get a divorce, it’s important that you know how divorce affects your taxes.
Below is a list of how divorce in particular impacts taxes. We suggest that you keep the following in mind while making financial decisions in your divorce:
1. Paying Child Support: If you pay child support, please be aware that child support is NOT tax-deductible.
2. Receiving Child Support: Child support is NOT counted as income; therefore, you do not pay taxes on child support received.
3. Paying Spousal Support: Nationwide, spousal support is tax-deductible for the person who pays it. However, it is only tax-deductible if it is ordered in the divorce decree. Any voluntary payments made outside of a divorce decree are not tax-deductible.
4. Receiving Spousal Support: Any spousal support received is counted as taxable income; therefore, you may need to increase the tax withheld from your regular wages to avoid paying penalties.
5. Spousal IRAs: If you contributed to your spouse’s IRA before the end of the year, unfortunately you cannot deduct those contributions. However, any money you contributed to your own traditional IRA can be deducted on your taxes.
6. Name Changes: If you change your name for any reason after the divorce, be sure to notify the Social Security Administration right away and request a new Social Security card. If the name on your taxes doesn’t match the SSA’s records, it can delay your refund.
For more detailed information about divorce and taxes, visit the IRS’s website.