Going through a divorce, especially when you live in California, can be an overwhelming process. Not only do you have the emotional implications to consider, but you also likely have to consider several financial matters. One thing that you may not have factored into the divorce is the tax implications. If you’re unsure of the impact divorce will have on filing your taxes, you’ll want to keep reading to learn how experienced Los Angeles high net worth divorce attorneys can assist you through these complex matters.
How Can a Divorce Impact My Taxes?
When you’re in the divorce process, you may hear that many decisions have tax implications. However, very few understand what these implications are.
Generally, the most significant change you can expect regarding your taxes following a divorce is that your filing status will change. You can no longer file jointly with your spouse, so you must file as an individual. When your divorce is officially finalized impacts how you file for that year’s taxes. In addition, you must determine whether or not you are filing as the head of household.
You will also need to file a new W-4 Form with your employer. This determines how much of your income will be withheld toward taxes.
What Tax Implications Must I Consider?
Aside from the change in status and filing a new Form W-4, there are implications and decisions you must make in regard to your taxes following a divorce. One of the most significant decisions regards which spouse will claim their children as a dependent on their taxes. However, the custodial parent will generally be the party to claim the dependant. If you and your spouse have joint custody, the spouse with the higher income will be the entity claiming the child.
It’s important to understand that generally, transfers made are subject to taxation. However, if the transfer is a direct result of a divorce, the Internal Revenue Service (IRS) will not tax the funds as long as the transfer is required in the divorce decree or if it occurs within one year of the separation. As such, you have one year to determine how you will divide your assets before tax implications can occur.
You should also understand that even if alimony is called for in the divorce decree, these transfers are still taxable. If your divorce was after January 1, 2019, you do not have to report payments made to a spouse or alimony received on your federal tax returns. However, you must report the paying or receiving of alimony when filing a state tax return.
As you can see, there are many considerations made during this process. That’s why it’s in your best interest to connect with an experienced divorce attorney from the Zitser Family Law Group, APC. When you’re getting a divorce, you are likely overwhelmed. That’s why our team is here to handle the legal complexities of this matter, so you can focus on healing from the emotional aspect of divorce.
