3 Simple Tax Effects of Divorce and Separation

3 Simple Tax Effects of Divorce and Separation By Stephen J. Ganns{3:00 minutes to read} We all know one of the most significant, life changing events many people go through is separation or divorce. At that time, income taxes may not be your number one priority, but here are some quick tips to remember as you navigate these waters.

Child Support

If you are paying child support, it is not deductible on your tax return. People often get confused by this, but if you think it through, it’s pretty simple. When a married couple buys clothing or school supplies for their children, they cannot deduct those purchases, so just because you give those funds to an ex-spouse doesn’t make them deductible.

Alimony/Maintenance

If you make payments to a divorced spouse under a separate maintenance decree, written separation agreement or a divorce decree, you probably can deduct those payments as alimony/maintenance. Only payments required by a decree or agreement qualify for federal tax purposes.

If the decree or agreement DOES NOT REQUIRE payments, they are not considered alimony/maintenance. Simply deciding to offer a spouse some money in trade for another asset that the spouse will give up, or in hopes of getting some good will, is not alimony/maintenance. The payments must be spelled out in the decree for them to be considered as alimony, and therefore deductible.

Alimony or maintenance payments received, provided they qualify as described above, must be included as income. If you are brand new to receiving alimony, be aware that unlike wages, withholding taxes are not taken out of alimony/maintenance payments. You may be required to make estimated tax payments instead or face underpayment penalties.

Name Change

Another small but important factor – if you decide to change your name after a divorce, you need to immediately alert Social Security. A failure to match your name on a tax return with Social Security records can delay your refund for months, and even trigger correspondence from the IRS questioning whether you actually filed a return.

These are some simple tax tips for people going through divorce. The tax effects of divorce and separation go far beyond what we have mentioned here. If you need any more information, feel free to discuss your situation with your tax preparer, or get in touch with us through email at info@gannscpa.com or by phone at 914-682-7007.

Stephen J. Ganns

Stephen J. Ganns, CPA
914-682-7007
steve@gannscpa.com
www.www.stephenjgannscpa.com

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