Divorce and taxes as a conversation sounds like the combination of two complicated and stressful things. Just like we all have to take care of our taxes every year, divorce can be as common. To further intensify both of those matters, when divorce occurs, tax norms, needs and risks can change.
In a past post we discussed a couple of points abut divorce and tax changes. If you are newly divorced or separated and this is your first tax year filing as such, don’t doubt that you need the help of a tax professional, as well as some advice from your divorce lawyer about tax impact.
Does child support impact taxes?
The party who pays child support cannot include the payments as deductible expenses. And the parent who receives the money for child support is not taxed for that money. Basically, the government wants to ensure that kids are getting as much of their financial support that they deserve.
Does alimony impact taxes?
For the party who receives alimony or spousal support as it is called in California, the payments if paid pursuant to a court order or written agreement will be considered as income and, therefore, taxed. The person who pays that spousal support will in those cases treat the support paid as deductible expenses. .
These are only some of the simplest explanations related to divorce and taxes. Changes to the family and the tax process get complicated and confusing. It can take time to understand the changes; it also often takes effective communication between exes to iron out specifics regarding their support and custody agreements in particular.
You might be in the process of divorce or fresh off out of the process. Your lawyer should be available to address any tax concerns or clarify matters of the divorce that your tax professional might need to consider.