Tax Filing Status: How will it change with divorce?

Tax Filing Status: How will it change with divorce? - Peace Talks Mediation Services - taxes, tax filing, divorce, collaborative divorce, finances - Photo by Olga DeLawrence on UnsplashWhen you and your spouse decide to utilize a collaborative divorce approach, both of you will have access to neutral financial mediators.

Financial mediators can help prepare schedules that project cash flows, net worth, and the tax effects of your proposed settlements.

They are often asked these 3 tax questions:

  1. How should I file my taxes?

Filings are based on your marital status as of the last day of the tax year.

If you are unmarried, your filing status is:

  • Single, or
  • If you meet specific requirements, Head of Household

If you are still married, the filing status is, married filing:

  • Jointly or
  • Separately

 

  1. Can I file as head of household?

Yes, if the taxpayer is:

  • Unmarried or “considered unmarried” on the last day of the year,
  • Paid more than half the cost of keeping up a home for the year, and
  • Had a “qualifying person” live with them in their home for more than half the year (except for temporary absences, such as school).

 

  1. What qualifies a taxpayer to be Unmarried?

The taxpayer is considered unmarried, if they meet ALL of these requirements, as of December 31:

  • They are submitting a separate return;
  • Paid more than half the cost of keeping up their home for the tax year;
  • Their spouse did not live in their home during the last 6 months of the tax year; and
  • Their home was, for more than half the year, the main house of their child, stepchild, adopted child, or foster child whom you could claim as a dependent

When you become divorced, your taxes can take on a life of their own!

At Peace Talks, our team has the experience and expertise to provide complete and accurate financial information. We will work effectively with you, your attorneys, and other professionals to accomplish your goals in a collaborative environment.

Contact us today!

Note: This information is general in nature and should not be construed as legal/financial/tax advice. You should work with your attorney, financial, or tax professional to determine what will work best for your situation.

Alimony – How New Tax Rules Can Affect It

Alimony – How New Tax Rules can Affect It - Peace Talks Mediation Services - alimony, taxes, COVID19, Coronavirus, tax filing - Photo by Kelly Sikkema on UnsplashDue to the COVID-19 pandemic, federal tax filings have been extended until July 15, 2020.

Often couples are blindsided by the tax impact of getting a divorce, but when you utilize the collaborative divorce process, you have a team of experts on your divorce team that will help you find your way out of the “jungle.”

When you and your spouse opt for a collaborative divorce, both of you are assigned a neutral financial expert. This expert will help you and your spouse project cash flows, determine adjusted net worth and share with you how your proposed settlement will impact your tax returns.

We are often asked, How will our divorce agreement address alimony and how will it change our tax landscape?

Here is the general gist of it:

  • The tax treatment of alimony changed as a result of the Tax Cuts & Jobs Act of 2017 (TCJA).
  • There are now dramatic differences based on whether the divorce or separation agreement was finalized before or after 2019.
  • For divorces finalized before 1/1/2019 the alimony tax burden and credit remained unchanged by the (TCJA) unless the divorce agreement is changed.
  • Before the new ruling, payments from the payer could be deducted. The spouse who received the payment was required to report the alimony as taxable income.
  • As a result of this new ruling, divorces finalized after 12/21/2018, the payer can no longer deduct alimony payments.

This new ruling can be very costly to the spouse who pays out the alimony and needs to be considered into the financial landscape of your divorce agreement before finalization.

At Peace Talks, our team has the experience and expertise to provide complete and accurate financial information, including tax advisement. We will work effectively with you, your attorneys, and other professionals to accomplish your financial goals in a collaborative environment.

Contact us today to see how we can help you and your spouse mediate a financial agreement that works well for all involved.

Note: This information is general in nature and should not be construed as legal/financial/tax advice. You should work with your attorney, financial, or tax professional to determine what will work best for your situation.