Getting a divorce will have several impacts on your taxes. The year after filing, you will need to make adjustments and account for any tax implications from your divorce. As you probably know, it is important that you file your taxes correctly to avoid penalties and fees that can greatly increase the amount you owe or have a huge impact on your refund amount.
According to NerdWallet, you need to start planning for tax season as soon as possible once you know you are going to divorce. There are several things associated with your divorce that will impact your taxes.
Pay attention to taxes on assets
When you divide your property as part of your divorce, you may face some tax consequences. If you receive certain investment income or retirement accounts, you may have to pay taxes on them. Make sure you understand what is taxable from your settlement, and set money aside to cover extra taxes.
Be aware of recent changes
In the past, you could claim alimony as income or write it off as an expense if you were paying it, but that changed. You can no longer include alimony on your taxes. This is beneficial if you receive it because you will not have to pay taxes on it, but it can be problematic if you pay it and do not get the reduction.
Choose the right filing status
The IRS will generally consider your marital status based on your status on the last day of the year. So, whether you got your divorce in March or November, for tax purposes, your divorce status spanned the whole year as long as it is final by December 31. Make sure that you choose the correct filing status. You may have to file single. Head of household requires meeting specific requirements that you may not meet after your divorce.