If going through a recent divorce wasn’t difficult enough now you have to think about your taxes? You may be thinking this is one more huge task to add to an already long list of to-dos. However, there are important things you need to consider during tax season if you are recently divorced. So gear up to get your maximum return and have your taxes completed and out of the way!
What are the top 3 things to consider when filing taxes post-divorce?
WITHHOLDING
Ok, let’s start with the easiest task. Most people think that you only need to fill out a new W-4 when you start a job. However, updating your W-4 with your employer after a divorce is important because you qualified for a lower tax rate and certain deductions when you were married. You will now want to think about your withholding adjustments on your W-4 to avoid an underpayment of taxes next year.
MARITAL STATUS
What was your marital status as of the last date of the previous tax year? If you were still married, you can file married filing separately however if your divorce was not final on the last day of the year you may want to consider married filing jointly with your ex-partner as you will be eligible for a higher deduction. There are also cases if a couple has been separated for more than 6 months in the previous year where one can file Head of Household. Then of course filing single is an option if your divorce was final in the previous tax year.
CLAIMING DEPENDENTS
If you and your ex are filing separately and have more than one child you can each claim a child as a dependent on your taxes. However, if you only have one child or an odd number of children then of course you can’t simultaneously claim them. The IRS has tiebreaker rules to help with this, for example, the parent with majority custody can claim the child or if custody is 50/50, the deduction goes to the individual with the higher adjusted gross income.
How can a CDFA help?
In addition to consulting with a CPA, a Certified Divorce Financial Analyst (CDFA) can help with tax implications of alimony and property division, review your finances, and discuss financial decisions moving forward helping you restructure your financial landscape as you move forward into your new chapter.