The stress, uncertainty and financial losses are bad enough, but divorce can also lead to a higher tax bill. Some things may be done to help lower this tax burden.
Divorce ends the ability to file taxes as married filing jointly which usually lowers taxes. A divorced spouse must file as single or, if there are children or other dependents living with the spouse, as head of household. This tax burden is usually heavier for the spouse who was the primary earner.
Ending a marriage can also terminate some tax credits and deductions. When custody is awarded to the ex-spouse, the non-custodial parent loses the child tax credit and other credits for child and dependent credit depended expenses.
This can be expensive. For example, the Child Tax Credit is $1,000 per child and may be increasing in the future.
Other tax credits end with divorce such as the savings, earned income, premium tax credits and the deduction for IRA contributions. The credit for retirement savings accounts, for example, has a $62,000 limit for married couples filing jointly and only $31,000 for single filers this year.
Finding new deductions and exemptions may help lower these losses. A spouse, after moving to a smaller post-marriage residence, can donate their excess belongings and claim a tax deduction. Taking job-relating education can allow a lifetime learning credit. Hiring a qualified tax preparer, whose fees are also deductible, can also eliminate the possibility of errors that cost money and find other valid deductions.
Finally, spouses should amend their W-4 form and submit to their employer after their divorce because employers may withhold less money than required. Even if more taxes are owed at the end of the year, much of the liability will be spread over many paychecks instead of being a large lump sum at the end of the year.
An attorney can help spouses seek a child support and property division settlement that meets their future needs, and which is fair and reasonable. Qualified lawyers can help assure that a spouse’s interests and rights are pursued in litigation and settlement negotiations.
Source: Motley Fool, “Getting divorced? Your taxes could be crushing,” Wendy Connick, Dec. 11, 2017