How a Divorce Can Impact My Taxes in 2023

You know that a divorce is going to significantly change your day-to-day life. However, like so many other people who have recently filed for divorce or recently completed a divorce, you might be surprised to learn that it can also significantly impact your next tax filing in 2023, as well as many tax years after.

How Divorce Can Impact Your Taxes

Your financial and tax situations could look different in many ways due to a divorce, such as:

  • Filing status: When you file a tax return, one of the first prompts is to cite your filing status. The status that you choose will have substantial tax ramifications. For example, there may be strikingly different tax breaks or penalties based on whether you jointly file as a married couple or file individually. While not always the best option, the date of entry of a final divorce judgment may be postponed until the following calendar year for tax purposes as when the divorce is finalized will impact filing status. You should always consult with an attorney regarding how a divorce will impact your filing status, and in turn, impact the rest of your tax return. In some cases, the help of a tax attorney and/or CPA may be required.
  • Child support/alimony: Your financial situation can change if you are required to pay or are set to receive child support or alimony each month. However, child support and alimony payments aren’t deductible by the payor or taxable to the payee, so there shouldn’t be any significant tax implications for these payments alone.
  • Property division: Divorces typically involve the division of marital assets (marital property) once they are finalized. While most transfers of property incident to a divorce do not have tax implications, some do. For instance, if you are liquidating a retirement account to convert it to cash, there will certainly be tax consequences (and other penalties) associated with the transaction. Further, the realization of short-term or long-term capital gains can have crucial tax consequences and are important issues to consider when liquidating securities or other investments pursuant to a divorce decree (or during the divorce itself).
  • Name changes: You will need to let the Social Security Administration (SSA) know if you change your name after divorcing. If you don’t notify the SSA in a timely manner, and you file your taxes under your previous name, then it could delay and complicate your tax return. Ultimately, there should not be any tax implications, but it can be frustrating and highly inconvenient.

If you have any questions about how a divorce can impact various corners of your life, come to the Law Offices of Jonathan Merel, P.C. We have built a law firm that takes a deliberately modern approach to family law matters. While here, we know that you will feel comfortable, confident, and perhaps most importantly, heard and understood. A divorce can be stressful, especially if it impacts your tax situation considerably, but it can be much more manageable with the help of our team.

Dial (312) 487-2795 or submit an online contact form to speak with us. Thank you.

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