Tax Ramifications of Divorce
Charlotte Divorce Attorneys – Tax Ramifications
Helping North Carolina clients navigate tax issues surrounding divorce
Nobody likes dealing with taxes, even in the best of scenarios. Add a stressful divorce into the equation and you may be dealing with a complex set of circumstances with many moving parts. You may have a lot of questions – is child support taxed? What about alimony? Who claims what on their taxes? It may all seem a bit overwhelming at first, but rest assured there are answers to your questions.
The knowledgeable Charlotte divorce attorneys at Epperson Law Group, PLLC are well versed in all matters of family law and tax law. We can help you make sense of current tax rules and regulations and how they apply to your life, post-divorce – and work with you during the divorce process to ensure the most favorable outcome for you financially. Call us today to schedule a consultation.
Following are some of the most common questions we hear from our clients regarding taxes and divorce.
How will my Charlotte divorce affect my taxes?
Many divorcing couples don’t take into account how their marital split might affect their federal and North Carolina taxes. It’s important to keep this in mind, as you may want to take potential tax implications into consideration when negotiating your spousal or child support.
According to IRS.gov, child support is not eligible for tax deductions for the payer, and it’s not considered income for the payee. However, there are a few exceptions to this rule:
- Dependency exemption
- Child care tax credit
- Medical and health care expenses
Spousal support (sometimes called alimony), on the other hand, does affect your taxes. For the payee, spousal support can count as income. For the payer, spousal support can be tax deductible.
Alimony payments are a different matter. There are situations that may deem otherwise, but typically alimony will be considered when you file your taxes. You’ll need to provide a copy of the court order when you file your taxes.
During the divorce and property division process, it’s important to understand the tax implications of dividing your property and assets. Consider the tax value of your marital assets during this distribution and remember that the IRS is watching. Our Charlotte divorce attorneys can provide expert guidance when splitting marital property.
Do I have to pay taxes on my Charlotte spousal support? Is it tax-deductible if I’m paying it?
Before 2019, alimony in North Carolina was taxable and tax-deductible. However, with the passage of the Tax Cuts and Jobs Act of 2017 (TCJA), this is no longer the case. As of January 1, 2019, spousal support is no longer tax-deductible for the payer. And, the payee is no longer required to pay tax on their spousal support. These changes can, for some individuals, affect their tax bracket, so it’s wise to consult with an attorney experienced with divorce and tax law to ensure you’re informed and aware of the tax implications of your divorce settlement.
You also cannot deduct your child support, or claim it as income, on your taxes under the TCJA.
Who claims the kids on taxes after our divorce?
The IRS gives the custodial parent the right to claim their children as dependents on their tax return. However, the non-custodial parent can claim their children on their taxes if the custodial signs a waiver stating they won’t be claiming the children on their taxes that year. For example, some parents may sign a divorce agreement stating that, in cases of shared custody, each parent will claim the children on their taxes every other year.
You can find more specific information from your local IRS office, located at Five Resource Square, 10715 David Taylor Drive, in Charlotte. If you’re filing your taxes for the first time after your divorce and are unsure as to your settlement terms, check with our Charlotte divorce attorneys to ensure you file properly.
How do I file taxes if I’m still in the middle of my Charlotte divorce?
If you’re currently in the process of divorcing, but are still married as of December 31, you may not file single status. You may file:
- Married filing jointly
- Married filing separately
- Head of household (under certain circumstances)
When filing taxes during divorce, there are a few considerations you should keep in mind:
- Collect your tax information and any necessary court orders early. It may take time to retrieve some of these records, so give yourself adequate time.
- If filing a joint return with your spouse, ensure you go over it carefully with the help of a professional before signing. You may be liable for any inaccuracies, even if you didn’t prepare the return.
- When considering child custody and child support agreements, it’s important to understand potential tax implications.
If you and your spouse are still married on December 31, file jointly and receive a tax refund, that refund will be in both your names and must be divided equally. This is true if you owe taxes as well – each spouse has equal responsibility, regardless of who earned the income.
Experienced Charlotte divorce attorneys
Divorce in North Carolina involves a wide variety of issues. One of these involves the ramifications of divorce on your taxes. The skilled lawyers at Epperson Law Group, PLLC have an in-depth understanding of tax laws and can work with you to ensure your divorce settlement works to your financial advantage. Talk to us today. We’re just across the road from the Home Depot off Ballantyne Commons Parkway. To reserve a consultation with one of our lawyers in Charlotte, Boone, or Weddington, please call 704-321-0031 or fill out our contact form.