Like so many Hollywood couples these days, maybe you are finding yourself a newly divorced person. With all the legal shenanigans that can happen during a divorce proceeding, have you taken the time to consider some of the more practical matters related to your finances? There are several tax-related items and helpful advice tidbits to be discovered after a change in your marital status.
Tax Considerations for Divorcés
Be sure to let your tax preparer know that your marital status has changed since the prior year. Your tax pro will need to know:
- Who has custody of the children?If children are in the family, one of you will have been named as a custodial parent.
- What should your filing status be for the year? Your tax preparer will ask you questions to make a decision on this.
- Did you receive any alimony from your ex-spouse? This will be taxable income for you.
- If you and your spouse made joint estimated tax payments during the year, have you decided how those will be allocated?The payments can be claimed in full by either spouse or divided up however they agree. (Note: The IRS may question how the payments are allocated, so be sure to keep documentation to justify what goes on your return.)
- What assets did you receive as part of the divorce?No gain or loss will be recognized on the transfer between spouses / ex-spouses if incident to a divorce. However, it will be helpful to have a listing of these assets for your tax preparer so you both are certain that you are reporting all sources of income that you should.
- Did you incur any expenses in getting the divorce? Generally, these expenses are not deductible. However, some expenses are deductible as a miscellaneous deduction on Schedule A subject to the 2% of AGI floor. Provide a detailed invoice from the attorney to your tax preparer to help determine if you can get a benefit from any of your expenses.
Post-Divorce Financial Advice
- Perhaps your ex-spouse handled the finances for your family. The first thing you need to do is to get yourself educated! Find a financial planner or adviser to help you understand your financial picture. If you don’t know of one, seek advice from a trusted friend or your attorney to help you find one. Understanding your finances is now one of your responsibilities, whether you like it or not.
- Review how your assets are titled, as it is possible and likely that the titles to some of your assets need to be updated.
- Consider updating your will and/or power of attorney after your divorce is complete.
Now that you have some advice on how to handle your taxes and finances, enjoy your new single life!
Contact our Ohio Tax Preparers
A recent change in marital status may have wide-sweeping tax and financial implications. Maybe you’ll qualify for new deductions. Maybe you’ll need to reexamine your tax planning strategy or your retirement plans. If you’re unsure of what financial steps to take to put your newly single life on solid footing, contact Rea & Associates. Our Ohio tax professionals will do more than just your taxes – we’ll give you the advice you need to get start planning for your new future.
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