Getting divorced has a number of financial implications, and this means that it also has potential implications for divorcing spouses’ obligations to the Internal Revenue Service (IRS). When going through a divorce, it is important to keep in mind that various aspects of your divorce can have tax consequences; and, for many separating couples, tax planning can be a key component of the divorce process.

Here is a brief introduction to some of the tax-related issues involved in going through a divorce:

1. Income Tax Filing Status

For purposes of your annual income tax returns, IRS regulations state that you are considered unmarried for the entire tax year in which you get divorced. So, even if the court issues your final divorce decree on December 31, you would still qualify as a single filer (in most circumstances) for the full year. IRS regulations also make clear that the same rule applies for opposite-sex and same-sex divorcees.

2. Tax Treatment of Spousal Support (Alimony)

For purposes of federal income tax, the general rule is that alimony payments are deductible by the payor and must be reported as taxable income by the recipient. While this provides for straightforward income tax filing in most circumstances, there are a number of potential complications that may require specific consideration. For example, while the IRS will generally treat payments made to a third party on behalf of a former spouse as alimony if they are characterized as such in the parties’ settlement agreement, this is not always the case. In addition, non-cash property settlements of any kind will not be considered alimony, and payments that appear to be for the support of children rather than a former spouse can be denied the parties’ desired tax treatment as well.

3. Tax Treatment of Child Support

Unlike alimony, child support is neither deductible by the payor nor taxable to the recipient. While state law principles will generally determine divorcing parents’ minimum child support obligations, as we noted above, certain other payments can be classified as child support for federal tax purposes as well. Under IRS regulations, if a former spouse fails to pay the total amount of alimony and child support due in any tax year, the payments made will be applied first to child support and then to alimony.

4. Divorce-Related Expenses

With regard to divorce-related expenses, some are deductible and others are not. As stated by the IRS:

“You can’t deduct legal fees and court costs for getting a divorce. But you may be able to deduct legal fees paid for tax advice in connection with a divorce and legal fees to get alimony. In addition, you may be able to deduct fees you pay to appraisers, actuaries, and accountants for services in determining your correct tax or in helping to get alimony.

“Fees you pay may include charges that are deductible and charges that aren’t deductible. You should request a breakdown showing the amount charged for each service performed. You can claim deductible fees only if you itemize deductions on Schedule A (Form 1040).”

5. Payment of Back Taxes

Occasionally, former spouses will run into issues where the IRS seeks to collect back taxes for income earned during their marriage. If taxes are owed on income that your former spouse failed to report on your joint returns, you may be eligible for one of three different forms of relief from joint liability.

Contact the McKinney Family Lawyers at Nordhaus Walpole PLLC

If you live in the McKinney area and are considering a divorce, we invite you to contact us for a free initial consultation. To speak with one of our experienced family law attorneys about your personal situation, please call (214) 726-1450 or request an appointment online today.