Many people fail to appreciate how substantial a financial impact a divorce in Georgia can have. Individuals are often well advised to seek advice on how to handle any of the potential financial issues that might arise during the division of assets in divorce. Individuals should always remember that divorce will greatly impact one’s taxes and how one files taxes in the first place. A seasoned and knowledgeable attorney will be able to best instruct a client through this type of complicated situation.
Alimony is referred to as spousal support or maintenance in many states. For individuals who are required to make alimony payments, it is possible to deduct these spousal support payments from their gross income when they files taxes. If you are the one receiving the maintenance payment, then the funds must be counted as part of your gross income when filing taxes. Spousal payments cannot count as alimony for tax purposes if the two spouses are divorced or legally separated but still reside in the same house.
Child support is not considered tax-free for federal income tax purposes, which means that parents and children do not owe any tax on the amount. In contrast to spousal support, child support payments are not tax deductible by the parent who makes the payments. A parent, however, might be eligible to receive a dependency exemption per child. The parent that ultimately receives the exemption is influenced by the agreement or decision made by the parents.
There are several applicable tax credits based on where a child lives during the tax year. There is also the possibility of shared or joint physical custody, but these arrangements rarely result in a child spending an equal division of time between parents. Even in the event that a divorce decree or custody demonstrates that parents have shared physical custody, the Internal Revenue Service still might not assign a tax break.
Division of Marital Assets
There are no immediate tax consequences if divorcing spouses agree to a property settlement. There is always a risk that one of the divorced spouses might find an unpleasant tax consequence as a result of this decision. Each member of the party receives property at its original tax basis but a lower tax basis might trigger a sizeable capital gain.
Filing Taxes after Divorce
Filing taxes after divorce starts with determining one’s filing status. Individuals who are deemed to be legally divorced by a court of law before or on the last day of the calendar year are eligible to file as single or head of household. Individuals are also able to claim either one of these statuses if the individuals is not fully discovered but has a legally binding separation agreement or if the spouses have lived in separate households for at least the previous six months of calendar tax year. For individuals who are not fully divorced by the end of the year and filed taxes jointly, it is recommended that they communicate with ex-spouses on the best manner in which to approach tax returns with the hopes that an amicable solution can be reached.
Contact an Experienced Attorney
If you would like to talk with one of the family law attorneys at Vayman & Teitelbaum, P.C., either fill out our online form or call the firm at 678-736-7700 in order to initiate your consultation.