How divorce may affect your taxes

On Behalf of | Oct 4, 2021 | Uncategorized |

Divorce is a difficult situation for anyone whos’ involved in West Virginia. It affects the way you live, as well as your finances. One of the most important things to consider before or during divorce is the issue of taxation.

Alimony

Alimony is money paid by one ex-spouse to another. If you are receiving alimony, then this income may increase your taxes because it’s counted as taxable income.

Similarly, your spouse paying alimony may receive a tax deduction for the amount paid. When you file taxes as a single person after divorce, this may affect how much of your income can get taxed at lower rates.

Child support

Child support is not taxable income. The parent receiving child support can claim his or her children as dependents, increasing the number of deductions available to them.

The parent paying this money will get a deduction based on how much they spend on supporting their ex-spouse’s child(ren). Even if you’re awarded joint custody of your kids, you still have to claim a dependency exemption for the children.

The parent paying child support cannot deduct this payment from their taxes, but they can file it as an adjustment if no tax is otherwise due.

Asset division

If you and your spouse divide assets, such as selling a home or transferring stocks, this can affect how much you owe in taxes.

When only one individual pays for something during the marriage, then there may be tax consequences when that asset gets transferred to an ex-spouse. For example, if you bought a car while married, but your spouse never contributed to the purchase cost, then selling it after divorce can result in capital gains tax.

If you and your spouse each pay for the same asset, then this is basically a “joint” expense during marriage and can get transferred to an ex-spouse without tax consequences.

Divorce tax consequences are important for both individuals involved in the divorce to consider. Understanding them can help you and your ex-spouse prepare for what to expect and ensure that things go smoothly.