If you are going through divorce or are recently divorced or separated, dealing with taxes may be the last thing on your mind. But with the financial upheaval that often accompanies these events, it is important to address the tax aspects as they are often a material financial component. Some key tax tips to keep in mind:
- Child Support. Child support payments are not deductible and if you received child support, it is not taxable.
- Alimony Paid. You can deduct alimony paid to or for a spouse or former spouse under a divorce or separation decree, regardless of whether you itemize deductions. Voluntary payments made outside a divorce or separation decree are not deductible. You must enter your spouse’s Social Security Number or Individual Taxpayer Identification Number on your Form 1040 when you file.
- Alimony Received. If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
- Special Marketplace Enrollment Period. If you lose health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. You may enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
There may be many other items to consider dependent on your particular tax situation and applicable community property laws. Your CPA and attorney, working with you as a team, can be a big help.
By Dale F. Jensen, CPA