Taxes are likely to be the last thing on your radar if you are going through a divorce. While your mind might be other places, it is important to think about taxes, because significant life events, like divorce, can significantly impact your bank account, thus affecting your taxes. Throughout the divorce process, or as soon as it is finalized, you may be facing spousal or child support payments and a name or address change, and you need to know how all of this affects your taxes.
Continue reading for several tax tips and details you may not know that you should keep in mind throughout your divorce.
Child Support — If you are paying child support, those payments are not tax deducible. If you are receiving child support, what you receive is not taxable.
Spousal Support Paid — You may be able to deduct your payments if your divorce or separate maintenance decree requires you to pay alimony. However, this only applies if your payments qualify as alimony for federal tax purposes. If payments made are voluntary, they are not deductible. When filing your taxes, you will need to enter your spouse’s (or ex-spouse’s) Social Security Number or their Taxpayer Identification Number.
Spousal Support Received — The amount of alimony you receive from your former spouse is taxable in the year you receive it. However, it should be noted that spousal support is not subject to tax withholding. Thus, to avoid a penalty, you will need to increase the taxes you pay throughout the year by estimating tax payments or increasing the amounts of taxes withheld from your paychecks.
Name Changes — If you choose to change your name after your divorce, you will need to notify the Social Security Administration and file an SS-5 application form for a new Social Security Card. To avoid a delay in your refund, make sure the name on your tax return matches the records of the Social Security Administration.
Spousal IRA —You are unable to deduct contributions from your ex’s traditional IRA if you receive a final divorce decree by the end of your tax year. However, you might be able to deduct contributions to your own IRA.
Special Marketplace Enrollment Period — A loss of health coverage due to a divorce is a qualifying life event that allows you to enroll in health coverage through the Healthy Insurance Marketplace. If health care is lost because of a divorce, you are still required to have coverage for you and your dependents claimed on your tax return for every month of the year.
Contact The Ault Firm
The professionals at The Ault Firm know how overwhelming and consuming divorce and separation can be. We understand what you are going through, and our knowledgeable attorneys want to help navigate this stressful and challenging process. If you are going through a divorce and are in the Salt Lake City or West Jordan, Utah area and need legal representation, contact us today to schedule your case review.