‘Do you have a good lawyer?’ Or, ‘Do you have a good accountant?’ These are some common questions asked by family members, relatives or friends when spouses decide to get a divorce. To most people, divorce is a form of freedom; freedom from a spouse’s yelling and mistreatment. However, as much as a divorce gives a form of freedom, it can as well make your life miserable because it is expensive.
For instance, if you are the core breadwinner, you are forced to continue catering for your children and spouse until he/she gets married to another person. In addition, a divorce can also affect your taxes in various ways. So, if planning to get a divorce, talk to your tax advisor so as to understand how getting divorced affects your taxes. Generally, your taxes will be affected in the following three ways.
Property
When property is mentioned, it does not only imply your house, but also your money. In general, your property will include your house, car, boat or yacht, land, savings accounts, medical savings among others. While this affects most people, some find it hard to deal with because they have worked hard to earn the property and feel robbed.
Property transferred between spouses will not have income tax consequences. This is because there are no records showing cash movement on that property. Conversely, if the property was used for bringing extra income (business), but after divorce it is not used anymore, then it may be taxed.
Children
When you get a divorce, your children will be your responsibility (exemptions). Child support is usually high and estimated around $3,650 for every child. Besides this, divorce will also affect your children because only one parent will claim them. This is decided by the court although other factors might be considered.
For instance, if you spent more time (days and nights) with your children and your spouse spent less, then you are eligible for their custody. However, if you both spent equal time with the children, then the court will consider your gross income. If you were the core breadwinner or earn more than your spouse, the children will be put under your custody because you are likely to provide more for them.
Alimony
Besides your children, you’ll also be supporting your ex. This happens especially when he/she is not making more money than you. Spouses need to support each other in a marriage, but it becomes unfair if one spouse must continue supporting his/her ex even after getting a divorce. One can only escape this if his/her ex gets married to another person. When you get divorced, you’ll be forced to pay your ex $1,000 every month. Remember, you will be taxed and so is the recipient.
So, before getting a divorce, examine the mentioned effects. For example, are you ready to lose your favorite car or that island you bought before meeting the person you will lose it to? If you had a pre-nuptial (prenup) or post-nuptial agreement, then you can go ahead with the divorce.
Sources:
Free Advice- Divorce Law: Effect of Divorce on Taxes
Taxbox- Divorce and Taxes
Bankrate- How divorce affects your taxes