When getting divorced, you'll end up paying for it in more ways than you expect. In fact, the process can cause quite a bit of confusion about how it affects you financially. While the assumption is that you need to give up half your stuff to your spouse, there are other ways that you'll end up paying for a divorce after it is finalized.
Deductions For Alimony
If you have been ordered to give your spouse alimony, there can be confusion about how the payments work for deductions on your taxes. For the person paying alimony, that alimony amount is allowed to be deducted on their taxes. For the person receiving alimony, that alimony payment must be treated as income.
However, the deduction and taxation of alimony is limited to what was decided on by the court. Giving more assistance in alimony does not mean that you can make a bigger tax deduction, and receiving more alimony means you don't have to pay taxes on it.
Claims For Dependents
When a single parent has sole custody, figuring out who is allowed to take the tax deduction is simple since the sole custodial parent is the only one allowed to take it. This gets more complicated when there is joint custody between two parents. In this situation, the parent that the child spends more days with is allowed to take the child exemption for having a dependant. This means if your child stayed with you 183 days during the year and stayed with your spouse 182 days, only you are allowed to claim the exemption.
The big problem happens when parents have not been keeping track and there is a disagreement about who can claim the child exemption. Be aware that whoever files their taxes first and lists having a dependent will get the exemption, and if it is not correct, the other parent will need to provide proof to justify the dependent claim to have the action overturned.
Taxes For Property Transfers
If property is being transferred to a spouse, be aware that no taxes will be paid at the time of the transfer. However, taxes may need to be paid when the property is sold. If the property has increased in value, there will be capital gains taxes that must be paid, which can be an unexpected cost that you did not anticipate.
For more info about the cost of getting divorced, be sure to work with a local divorce lawyer such as Madison Law Firm PLLC.
Hello. My name is Stephanie Laurel. I have recently been through a divorce, and although I don’t wish it on anyone, I do wish that everyone could come out of the proceedings feeling they have been taken care of. My husband and I had been married twenty-eight years. We have four children, two of which are still under eighteen years of age. We owned the home we lived in and had a vacation home in a different state. We are civilized people, we get along fairly well considering, but no matter how much we thought we could go through the divorce process without lawyers, it wasn't possible. We each hired a divorce attorney to represent us. Most of the negotiations went well, but when we hit a rough spot the attorneys took over. Thank goodness. I’m going to share more about the experience and hope it helps you.