Filing Taxes After Your Orlando Divorce
After you get divorced—whether after a short marriage or a long-term marriage—it is important to think carefully about your tax situation and how filing your taxes might change now that you are single. According to an article in Credit Karma, there are numerous complicated tax matters that accompany divorce in Florida, and it is always a good idea to discuss tax implications with your attorney. In the meantime, however, you can learn more about some changes that will take place with regard to your taxes and some steps you can take to make tax time easier once your divorce has been finalized.
- Changing Your Filing Status
One of the first things to know about filing your taxes after a divorce is that you will likely need to change your filing status. For most married couples, the couple files with the “married filing jointly” status. Other married couples file with a “married filing separately” status. Either way, you will need to change your filing status. Once your divorce is finalized, you can file as “single,” or you may be able to file as “head of household.”
To file with “head of household” status, you will need to meet a few requirements. First, your divorce must have been finalized by December 31 during the year for which you will be filing your tax return. For example, if you are in the process of getting divorced now, you will need to be divorced by December 31, 2019 in order to file with “head of household” status in April 2020 when you file your 2019 tax return. In addition, you must have paid 50 percent or more of the costs of keeping up your home. Finally, you must have a “qualifying person,” which means someone who lived with you for 50 percent or more of the year such as a school-age child or a parent for whom you provide support.
It is important to know that both spouses cannot file with “head of household” status after a divorce by counting the same child or children.
- Determining How Alimony Will Impact Your Tax Situation
If you pay or receive alimony as part of your divorce, you should know that the Tax Cuts and Jobs Act has changed the way that alimony (also known as spousal support or spousal maintenance) is taxed. Prior to the recent tax law change, the person who paid alimony could deduct any alimony payments prior to paying income taxes. As such, the person paying alimony would not pay taxes on that amount. Instead, the party receiving alimony would pay taxes on the amount received as income. Now, however, that model has changed.
Currently, with the changes to federal tax law, the party who pays alimony pays taxes on it as income and cannot deduct it. Then, the party who receives the alimony payment does not have to count it as income for tax purposes and thus does not pay taxes on that money received.
- Handling Retirement Account Division
Typically, if you withdraw money from a retirement account like a 401(k), you will need to pay taxes on it in addition to a penalty (which is usually 10 percent). When you get divorced, any retirement accounts that are classified as marital property will need to be divided. If you use a qualified domestic relations order (QDRO), you can withdraw money from a retirement account for division purposes without paying the penalty.
However, unless that money is transferred directly into another retirement account (for example, if Spouse A’s retirement account is divided and a portion of it goes directly into Spouse B’s retirement account), then taxes must still be paid on the withdrawn amount.
Contact an Orlando Divorce Lawyer
Do you have questions about divorce and taxes? You should speak with an Orlando divorce attorney about your concerns. Contact Anderson & Ferrin today.