Divorce is ranked among the most stressful life changes for those who go through it, and part of that stress is due to the way it impacts other areas of a person’s life. Whether you’re in the process of divorcing or your paperwork has all been finalized, it’s important to keep your divorce and the changes that it can cause in mind when tax season rolls around.
So, what’s the impact of divorce on filing your taxes? Our Sacramento area team is here to help you cover your bases no matter where you live with some of the effects you might forget about.
This one might seem straightforward, since your filing status is no longer “married,” but the dates of your divorce matter. If your divorce is finalized by the end of the tax year, you’ll file as “single” or “head of household” accordingly. If your divorce is in process at year end, though, you’re still married in the eyes of the IRS; our expert tax preparation team near Sacramento can help you determine which status to use with your best interests in mind.
Alimony can be complicated, as it’s one more thing to keep in mind while budgeting and planning for taxes. If you’re paying alimony, the expenditure is tax deductible; voluntary payments to your spouse or former spouse, though, are not tax deductible.
If you’re receiving alimony, it is taxed for the year in which it’s received. Bear in mind that alimony doesn’t have taxes withheld, so you’ll need to set money aside in anticipation of tax owed.
Unlike alimony, child support doesn’t factor into your taxes. Paid child support can’t be deducted, and received child support isn’t taxable.
With health insurance coverage being required by law, you’ll need to make changes if a divorce causes you to lose coverage that you had through your spouse. To avoid potential fines come tax time, be sure to obtain new coverage. If you can’t get coverage through your own employment, note that divorce is cause for a special enrollment period through the Health Insurance Marketplace.
For the expert insight you need when it’s time to file, or for help preparing ahead of time, contact the pros at Paramount Tax Relief by calling (916) 533-9940 today!