Filing Taxes During and After a Divorce

Divorce Will Affect Your Adult Children

Handling your tax returns can be a daunting task, and when you are filing after a divorce, the complexity increases. It is important to ensure a seamless collaboration between your divorce attorney and accountant to address current and future tax-related concerns.

During the Divorce Process

Collaboration between your divorce lawyer and accountant is essential during the divorce process to set up a tax arrangement that considers both immediate and future implications.

  • Marital Status Dynamics: If your divorce is still pending as of December 31, 2023, the IRS views you as a married couple for that tax year. This means filing options are limited to joint filing or "married filing separately."
  • Optimizing Filing Choices: It is important to understand the implications of joint versus separate filing. While joint filing is common, there are circumstances that may make separate filing more advantageous. Rely on your accountant to make the calculations that will help to guide your decision.

Post-Divorce Finalization

Once the divorce is finalized, new considerations come into play.

  • Filing as Head of Household: If you are filing as single after the divorce, the option to file as "head of household" may offer more favorable tax rates. This is contingent on supporting a dependent parent or having a "qualifying person" residing with you for at least half the year. You must pay at least half of the cost of keeping up your home and you must be considered "unmarried" on the last day of the tax year.
  • Navigating Custody-Related Complexities: IRS rules regarding "qualifying persons" can be intricate, especially in shared custody situations. Your attorney should play a crucial role in crafting agreements to determine the custodial parent that is eligible for head of household status.

Addressing Additional Tax Implications

  • Homes: If you and your ex-spouse sold a home together or plan to sell your home, you need to address the capital gains taxes in the settlement agreement. In addition, you should consider allocating funds for back taxes or current-year tax liabilities.
  • Tax Losses: Navigate prior tax losses thoughtfully. Only the party who owned the asset incurring a loss can claim it in future years. You and your divorce attorney need to negotiate how significant losses will be handled in your settlement agreement.
  • Children: Couples with children must establish how tax credits associated with them will be managed. Custodial parents typically have the automatic right to claim these benefits but may choose to waive it using the appropriate release form.
  • Spousal Support: Despite changes in the federal law regarding spousal support deductions, spousal support remains deductible under New York State law. This should be explicitly stated in the settlement agreement to ensure proper deduction and taxation.

Seeking Professional Guidance

Engaging with experienced divorce lawyers is a key decision in this process. While they cannot provide tax advice, they play a pivotal role in identifying and addressing relevant tax issues. Early discussions with both your lawyer and accountant are key to proactively managing tax matters.

Vacca Family Law Group understands the unique challenges associated with divorce and taxation. Our collaborative attorneys can offer tailored advice to help you make informed decisions, ensuring that your tax filings align with the specific circumstances of your divorce. Call us at 212-768-1115 or contact us online to schedule a consultation.

Vacca Family Law Group is located at One Grand Central Place, 60 E. 42nd St. #700, New York, NY 10165.