Divorce & Taxes

Know what divorce is filled with? Bad news. For all that divorcing people gain, like new relationships, peace of mind, emotional health, and new beginnings, divorces are still filled to the brim with loss. Divorced adults lose money. Homes. Friends. Family members. Their sense of self. Confidence. Stability. I could go on and on. Having worked with divorcing people for nearly 20 years, I can tell you that most people go on to live better, more fulfilling lives that bring them joy…but that exciting future doesn’t change the difficulty of living through the divorce.

But here’s the good news! Divorce often comes with wonderful tax breaks for people…and this is the time of year to reap those benefits. About time, right?!?!? Exactly. In July of 2021, Kiplinger put together a wonderful article designed to make people aware of the most overlooked tax breaks for newly-divorced people. Keep in mind, these are not ALL of the advantages…just the most overlooked. To make sure that you reap every tax benefit available to you, please do work with your tax preparer, accountant, and financial planner.

​The tax breaks identified by Kiplinger include:

• Changing your filing status (if divorce is final by December 31) to head of household
• Deducting court-ordered alimony (that you pay) on your taxes if your agreement was in place prior to the end of 2018.
• Making sure you get your child tax credits as outlined in your decree. If your ex is in arrears, and your child lives with you more than 50% of the time and you provide the majority of their support - you may be entitled to more than your decree outlines. Contact your attorney for guidance about this. Note, may Decrees will have language that if a parent is behind on his or her support payments at the end of the year he or she loses the dependency exemption. 
• Medical expenses that you have paid for your child
• Be mindful of property tax basis for properties divided in the divorce
• Potentially avoid $250,000 in gains on the sale of a home
• Alimony recipients, because alimony qualifies as income, can contribute an additional $6,000 into IRAs, reducing tax liability. If you’re over 50, that cap increases to $7,000. (Wrong - Alimony payments are not taxed to the receiver and not credited to the payor).