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Changes in taxes that occur after divorce

On Behalf of | Feb 14, 2018 | Divorce

People in Kentucky who are getting a divorce may have several changes in their taxes. When a divorce is finalized by the last day of the calendar year, people must file their taxes separately for that year. If the couple remains separated but the divorce is not yet final, they can choose between married filing separately or filing jointly.

If there are children, another consideration is which parent is the custodial one. Usually, this is the parent who claims the dependent child exemption although the custodial parent may also sign a waiver allowing the noncustodial parent to make this claim. This parent can also take the American Opportunity higher education credit and the child credit.

Child support is not tax-deductible or payable on taxes. However, if one person pays alimony to the other, the payer can deduct the alimony on taxes. The recipient must pay taxes on the alimony. During the divorce process, there may also be some tax implications associated with division of property, but this is usually addressed in the divorce agreement. However, people who have kept an asset and then sell it should be aware that they might owe capital gains tax on it.

Alimony may be a factor in relationships with a sizable income disparity. Changes in tax law made by Congress at the end of 2017 mean that for divorces finalized after 2018, alimony will no longer be tax-deductible nor tax payable. People who anticipate paying or getting alimony and who believe their divorce may not be finalized until 2019 or later might want to talk to an attorney about what this could mean for them financially. Divorce may result in a lower standard of living for some people, and it is essential for people to understand all the ways their finances may change and how they can take steps to help ensure financial stability.