While in the process of negotiating your divorce agreement it’s very important to consider the possible tax implications that may be involved. First off, here’s what will change on your tax return after your divorce:
- You will file Head of Household instead of Married.
- One personal deduction will be lost.
- If you are to receive alimony, it’s taxable and you may have to file quarterly estimated taxes on it.
Discussing tax implications of your divorce with your attorney first and then possibly with an experienced tax professional will help you make wise choices regarding:
- Which parent will claim the children as dependents?
- Deductions that you can use when paying alimony.
- Using the appropriate deductions for the cost of your divorce on your tax form.
- Early distribution penalties regarding retirement accounts.
- The taxes that may be owed on marital assets.
Understanding how your divorce will impact your taxes before your divorce agreement is finalized may pay off for you and prevent you from being surprised by a big tax bill. Consult your experienced divorce attorney for advice.