Divorce will obviously have a few tax consequences. The fact is that, when the partners were both married, they might have filed the tax returns jointly, but now, after separation, they might have to file returns as single tax payers for a period of time till they are married again. They will be faced with different filing statuettes as the rates will change and this will also affect the standard deduction amounts.
Before the Divorce
Even before the divorce is finalized, you might feel the pinch of the tax implications. Even during the process of divorce, couples these days, choose to file for separate returns. The implication of this on your financial status is that your savings will go down as joint returns have a lower tax liability. However, there are occasions when the filing of separate returns has a better tax result for a divorced couple.
The Value of Dependants
Even children have an effect on the tax issues. Herein, tax considerations also get more complicated. If you have dependents, then it provides the filter for an immediate subtraction from the taxable income of a parent. This would lead to a saving of thousands of dollars over years. You must also take into consideration the fact that such tax breaks are allowed only when the dependent will meet all the IRS eligibility requirements in this regard.
Other tax breaks in this regard include, amongst others, dependent care credit, educational deductions, child tax credits etc.
The Assessment of Assets
When undertaking the divorce proceeding, you must realize one thing. Your assets are going to get divided. Even if you have done the investment in your name, there is a chance that your wife will get an equal share of that investment. Also, from joint assets, you will now go towards single ownerships. As can be imagined, there are tax issues herein. If you have set your sights on a particular asset during the divorce settlement, it's important that you just don't look at its dollar value. You must also have a thorough understanding of the tax implications and only if you can afford those, must you make your choice.
Spousal Support
Alimony is tax deductible for the person who is paying, whether it is the wife or the husband. However, whoever receives the payment; needs to pay tax on the amount. It is advisable that both the parties maintain complete and accurate records as to the payments made with regards to alimony. The payments and receipts are used to ascertain the amount of tax that is deductible and the amount of tax that must be paid.
The requisite documentation will go a long way in solving all your tax problems and issues. The tax issues regarding divorce are something that you must be wary of before you start your divorce proceedings. You must consult a tax expert for this purpose and be well versed with all the knowledge about tax deductions. When it comes to a divorce you must be prepared on all accounts.
Tax issues will dictate a person financial status after divorce. You must be well aware of what you can afford so as to make the correct decision during divorce settlements.
Dealing with the divorce is difficult but fortunately there is a great resource to help men cope with the divorce. Find it here.
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