FAQs People Have About Their Taxes After or During a Divorce

When people divorce in the United States, there are several issues they must face. One such issue is their taxes. Each detail of this issue will differ because it’s all on an individual basis. 

However, there are some general questions often asked about divorce law and taxes. If you’re unsure of what your tax situation is after a divorce, it’s best to consult both an attorney and CPA to learn more.

7 Commonly Asked Questions About Divorces and Taxes

1 – Will You Need To Pay Income On Any Monies or Property Received In A Divorce Settlement?

Any money or property that goes from one person to another will not be subjected to any income tax.  However, should the property be sold after the divorce settlement, a capital gains tax will need to be paid on ay appreciation before and after the divorce settlement.

2 – Is Alimony Tax-Deductible or Taxable?

When alimony payments fall under the federal rules, the paying spouse will need to deduct payment from the taxable income. The paid spouse will need to claim this alimony as income on the IRS 1040 line 11. Child support is not taxable or deductible.

3 – Are Legal and Accounting Expenses From A Divorce Tax Deductible?

The accounting and legal expenses cannot be deducted from your taxes. Any fees paid for to enforce the alimony obligation can be deducted.

4 – Are An Ex-Spouse’s IRA Payments Taxable?

If you’re 59 and younger and haven’t elected to roll payment over into an individual IRA, payments will be taxable. If the payments are rolled over into an IRA, only withdrawals are taxable. If you’re older than 59, the rules are a bit more complicated. Therefore, you should speak to a divorce attorney or CPA.

5 – Are Payments For Rent, Medical and Tuition Stipulated In Divorce Decree For Ex-Spouse Deductible?

If these payments are considered to be alimony according to IRS rules, the paying spouse has the right to deduct them and the spouse receiving the payments has to include them as taxable income.

6 – Does It Matter What Status You File Under and, If So, What Should You File Under?

The status you file under is important. The best filing status is a Joint filing status. After that, it goes Head of Household and Single. People have get divorce tend to go with single if they have not remarried. However, if you have a dependent that lives with you most of the year and you provide them with most support, you can qualify for Head of Household.

7 – Is An Ex-Spouse’s House You’re Paying For Tax-Deductible?

If your ex-spouse owns a home currently but you’re the one making the payments, those monies could be applied to the alimony and deducted.

If you and your divorcing spouse jointly own a home, the rules are a bit more complicated. It’s best to talk with an attorney. The payments could qualify as alimony with half of the mortgage payments qualified for deduction where the other half is may fall under standard income tax rules. Deductibility will vary on property and insurance tax; it all depends on the way in which the property is owned legally.