Divorce and Taxes

March 13, 2019 — by John Conger
Tags: Divorce Alimony Family Law

Filling out your tax returnWe are now in the thick of tax season. If you filed for a divorce or finalized a divorce recently, you may be wondering what that means for your tax returns. The issue can be complicated, which is why you should speak with an experienced family law and divorce attorney as well as your accountant. The Stockton, CA law firm of Shore, McKinley, Conger & Jolley, LLP has advised numerous divorced couples on how to file their taxes and other matters related to short-term and long-term financial stability.

New laws have come into effect that may impact your tax returns of you have filed for divorce. Let’s cover a few of the basics below.

Should I File a Joint or Separate Tax Return?

This depends on the date when your divorce is finalized. If you finalized your divorce by December 31, 2018, you will file an individual tax return this year. Couples who finalized a divorce on or after January 1, 2019 or are still in the process of filing for divorce can file a joint tax return.

Those filing an individual tax return can still file as a head of household so long as the following conditions are met:

  • A dependent has lived with you for at least half of the year
  • You have paid more than half of the upkeep costs of your home

Can I Still Claim a Child as a Dependent?

Yes, though again certain conditions must be met.

If you are a custodial parent, you can claim your child or children as dependents. A custodial parent is the parent who has custody of their child for the majority of a year.

Non-custodial parents can still claim a child as a dependent. However, the custodial parent must first sign a waiver stating they they will not do so on their own taxes for the year.

How Will Taxes Affect Alimony?

Alimony payments used to be tax deductible, and any received alimony payments used to be considered taxable income. New tax laws coming into effect will significantly alter the amounts that need to be reported.

Based on new tax laws, alimony payments are no longer tax deductible, and alimony received is no longer considered taxable income. This will not just affect people currently paying and receiving alimony, but future prenuptial agreement negotiations as well.

Do Tax Laws Affect Child Support?

No.

Child support payments have never been tax deductible, and any child support received did not have to be reported as taxable income. The law remains the same.

Will I Owe Taxes If a Martial Home Is Sold?

Many married couples wind up selling their marital home as part of a divorce and splitting the amount of the sale in half. Any profit from the sale of the home may be subject to capital gains tax, however. It is possible to exclude some of these profits from taxation depending on the size of the sale, the amount of time that the marital home was owned, and additional factors.

What About Retirement Accounts?

Many married couples have disputes over retirement accounts during divorce proceedings, particularly because certain retirement benefits will not be paid out until a later time. For pensions, a qualified domestic relations order (QDRO) can be issued. This will advise pension administrators on any amounts that need to be paid to a former spouse.

Your attorney can offer additional advice on other retirement benefits and accounts, and how you can divide these with a spouse while limiting tax penalties.

Speak with Our Divorce Attorneys

To learn more about you legal options in a divorce proceedings, be sure to contact our team of divorce lawyers. The law firm of Shore, McKinley, Conger & Jolley, LLP is here to offer sound legal counsel. You can reach our offices by phone in Stockton and Walnut Creek by calling (209) 477-8171.