Filing for divorce means initiating the process of ending your marriage. Once a judge signs your paperwork and finalizes your divorce, you can finalize the division of your property and settle into a co-parenting schedule if you have children.
However, there may still be financial consequences from your divorce for several years to come. For example, those who filed for divorce or recently finalized a divorce may need to familiarize themselves with certain rules regarding their income taxes following a divorce.
Some support counts as income, and some support doesn’t
If you receive child support payments from the other parent of your children, you do not need to claim those funds as taxable income. Although you may need to report the child support to the Internal Revenue Service (IRS), what you receive in child support will have no bearing on your final tax obligations.
However, if your spouse will have to pay alimony or spousal maintenance, those funds add to your taxable income the year that you receive the payments. You will need to report and pay taxes on your alimony.
Retirement accounts may pose tax challenges
Depending on how you held your retirement accounts prior to divorce and how you divided retirement resources during the divorce process, there may be some tax implications related to the division of those accounts, as well as deductions available to those making deposits into their own retirement accounts.
You have to report support paid
As someone paying child support or alimony, you may need to report the details of those payments when filing your tax returns. Child support payments are not tax deductible, but in some cases, alimony or spousal support payments could be.
Your health insurance credits may change
Your shifting household income and marital situation can affect your insurance coverage and also your eligibility for a Marketplace plan. If you qualify for tax credits, those may change because of the divorce as well.
The financial changes that occur during a divorce can reduce your income tax return or increase your tax obligations. Having a clear understanding of the financial impact of divorce and the different choices you make during the divorce process will help you minimize the consequences of ending your marriage.