Understanding How Divorce Affects Your Taxes in Nevada
What Happens to Your Taxes When You Get a Divorce?
Divorce is a significant change; it doesn’t just change your family situation—it can also change how you pay your taxes.
If you live in Las Vegas or anywhere else in Nevada and get a divorce, you might wonder how this will affect your tax situation.
Let’s talk about what you need to know.
Your Tax Filing Status Will Change
When you’re married, you can file your taxes with your spouse. This is called “filing jointly.” But once you are divorced, you can’t file jointly any more. You will need to file as “single,” or if you have kids and take care of them most of the time, you might be able to file as “head of household,” which can give you some tax benefits.
Who Gets to Claim the Kids?
If you have children, only one parent can claim them as dependents on their taxes. Usually, the parent who has the kids more than half the time gets to claim them. This can significantly help because the government gives you tax breaks for each child you claim.
Alimony and Child Support
The rules about alimony (money one spouse pays to the other after a divorce) have changed.
In the past, the person who paid alimony could deduct it from their taxes, and the person who got it had to pay taxes.
But now, for divorces after 2018, this isn’t the case anymore.
Alimony isn’t tax-deductible for the person paying it, and the person receiving it doesn’t count it as income.
Child support is different from alimony. It’s money paid to help with the expenses of raising children.
It is important to remember that child support doesn’t change anything about your taxes.
It’s not deductible for the person who pays it or taxable income for the person who gets it.
Dividing Property and Debts
When you get divorced, you might have to split up your things and any debts with your ex-spouse. Things like houses and cars can have tax effects if you sell them. Also, if you have to pay off any debts in both of your names, you need to know that you can’t deduct the interest on your taxes like you might have done before.
Legal Fees and Advice
Remember, the cost of getting help from lawyers or tax professionals because of your divorce usually can’t be deducted from your taxes. But if you’re paying for advice on getting alimony or taxes, you might be able to remove those expenses.
Looking Ahead
Even though getting a divorce can make your taxes a bit more complicated, understanding these changes can help you prepare. If you’re unsure what to do, talking to a tax professional is a good idea. They can help you understand how your divorce will change your taxes and what you can do about it.
After Divorce: Filing Status Options
When married, you can file your taxes as “Married Filing Jointly” or “Married Filing Separately.” But after a divorce, your options change. If your divorce is finalized by December 31st, the IRS considers you unmarried for the whole year. You’ll typically file as “Single,” but if you have a qualifying dependent, you might be able to file as “Head of Household,” which can give you a higher standard deduction and potentially lower your tax bracket.
Claiming Dependents and Tax Benefits
For divorced parents, deciding who claims the children as dependents can significantly affect your taxes. The right to assert a child can mean access to tax benefits like the Child Tax Credit, the Earned Income Tax Credit, and education credits. Usually, the custodial parent (the one the child primarily lives with) can claim these benefits. Sometimes, parents may agree to take turns claiming children in different years. It’s essential to have this detailed in your divorce agreement to avoid confusion.
The Alimony Shift
For divorces finalized before 2019, alimony payers could deduct payments on their taxes, and recipients had to report it as taxable income. However, this is no longer the case for divorces finalized after December 31, 2018. Alimony payments are no longer deductible for the payer, and the recipient does not include these payments as income. This is a significant shift that affects financial planning post-divorce.
Splitting Assets and Selling Property
Divorce often involves dividing property, which can have tax implications, particularly regarding capital gains tax. For example, if you sell your marital home during or after a divorce, you may be eligible for a capital gains exclusion ($250,000 if you file as single or $500,000 if you’re still filing jointly in the year of your divorce). Other assets, like stocks or retirement accounts, also have rules about how they’re taxed upon sale or withdrawal.
Deductibility of Legal Fees
Most legal fees related to divorce are not deductible. However, if you have specific fees for tax advice or obtaining taxable alimony, those may be deductible. It’s crucial to keep detailed records and consult a tax professional to see what might apply to your situation.
Tips for Navigating Post-Divorce Taxes
- Update Your Information: Make sure to update your W-4 form at work to reflect your new filing status and any changes in the number of allowances you claim.
- Keep Good Records: Detailed records of financial transactions, alimony payments, and child support are crucial for accurate tax filing.
- Consult the Experts: Tax laws can be complicated, and the nuances of your specific situation may require professional advice. A tax expert can guide you through the process and help you understand your obligations and benefits.
- Consider the Future: Some tax-related decisions made during a divorce settlement can have long-term implications. Think about future tax years and how changes in income, living situations, and adjustments in the tax law might affect you.
- Review Your Divorce Decree: Your divorce decree should outline who claims the children as dependents and any other tax-related agreements. Make sure this document is clear and that both parties understand the terms.
Breaking It All Down for You
By understanding these factors, you can better prepare for the tax implications of your divorce. While the process can be stressful, staying informed about your taxes can help you make more strategic decisions during and after your divorce.
Frequently Asked Questions
What defines a ‘qualifying dependent’ for the Head of Household filing status?
A qualifying dependent for the Head of Household status is usually a child or relative who lived with you for more than half the year and for whom you provided over half of their financial support. IRS guidelines specify who qualifies, so it’s advisable to check their rules or consult a tax professional.
Can I claim the Child and Dependent Care Credit post-divorce?
Yes, as a custodial parent paying for childcare to work or seek employment, you may qualify for the Child and Dependent Care Credit. This credit can reduce your tax liability.
If my ex and I share custody equally, who claims tax benefits for our child?
In shared custody, tax benefits for the child typically go to the parent with the higher adjusted gross income. However, parents may agree to alternate claiming the child, a decision that should be documented in the divorce decree.
How does divorce affect IRA contributions?
Divorce may alter your ability to contribute to an IRA. For example, if you previously contributed to a spousal IRA based on your ex-spouse’s income, you’ll need sufficient earnings to contribute post-divorce.
What happens if both parents claim the same child on their taxes?
If both parents claim the same child, the IRS applies tie-breaker rules to determine who can claim them. This could require one parent to amend their return. Clear communication with your ex-spouse can prevent this issue.
Do I need to report the division of property on my taxes?
Typically, the division of property isn’t reported on taxes. However, if you sell property received in the divorce, you may need to report any gains or losses from the sale.
Are contributions to my child’s 529 college savings plan deductible?
Contributions to a 529 plan are not deductible on federal taxes but may be on state taxes, depending on state regulations. Earnings in a 529 plan grow federally tax-free and are untaxed when used for college expenses.
Can I file jointly with my ex-spouse after divorce?
No, once divorced, you cannot file jointly with your ex-spouse. You’ll file as Single or, if eligible, as Head of Household.
What if my divorce isn’t final by the end of the tax year?
If your divorce isn’t finalized by December 31st, the IRS still considers you married for that tax year. You may file as Married Filing Jointly or Married Filing Separately.
How does selling the family home affect my taxes post-divorce?
Selling the family home may qualify you for a capital gains exclusion of up to $250,000 (single) or $500,000 (joint) if sold in the year of divorce. To qualify, you must have lived in the home for at least two of the last five years.
What if my ex and I can’t agree on claiming children as dependents?
If you and your ex-spouse can’t agree on claiming dependents, consider mediation or legal assistance to resolve the issue in accordance with your divorce decree.
Glossary
Adjusted Gross Income (AGI): Your total income minus specific deductions, like contributions to retirement accounts or student loan interest. It determines your tax liability and eligibility for certain tax credits and deductions.
Alimony: A financial payment one ex-spouse may be required to make to the other after divorce. The laws around the tax implications of alimony have changed for divorces finalized after December 31, 2018.
Capital Gains Tax: This is a tax on the profit from selling property or an investment. If you sell your marital home or other assets, you may have to pay this tax on your profit.
Child and Dependent Care Credit: A tax credit that reduces your federal income tax based on the amount you spend on childcare services, allowing you to work or look for work.
Child Support: Money paid to the custodial parent by the non-custodial parent to help with the costs associated with raising a child. This is not taxable income for the recipient and not tax-deductible for the payer.
Custodial Parent: The parent with primary care, custody, and control of the child(ren) following a divorce or separation.
Dependent: A person who relies on another, typically a family member, for financial support. In tax terms, it often refers to a child of the taxpayer.
Earned Income Tax Credit (EITC): A refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children.
Filing Status: Your tax filing category determines which tax rates and standard deductions apply to you. Common statuses include Single, Married Filing Jointly, Married Filing Separately, and Head of Household.
Head of Household: A tax filing status for unmarried individuals who pay for more than half the household expenses and have a qualifying dependent.
IRS Tie-Breaker Rules: These are the rules the Internal Revenue Service uses to determine which parent can claim a child as a dependent when both parents attempt to claim the child on their tax returns.
Marital Home: The primary residence of the couple during their marriage. In the context of divorce, it often represents a significant asset to be divided or sold.
Non-Custodial Parent: The parent who does not have primary care and custody of the child(ren) following a divorce or separation.
Qualifying Dependent: A child or relative meets specific IRS criteria for tax purposes, allowing a taxpayer to claim certain tax benefits.
Spousal IRA: An Individual Retirement Account that allows a working spouse to contribute to an IRA in the name of a non-working spouse, which can be an essential retirement savings tool for couples.
Standard Deduction: A fixed dollar amount that reduces the income you’re taxed on. Your filing status determines the amount of your standard deduction.
Tax Bracket: The range of incomes taxed at particular rates. As your income increases, the income above certain thresholds is taxed more.
Tax Credit: An amount that taxpayers can subtract directly from the taxes they owe. Tax credits are more beneficial than deductions because they reduce tax liability dollar for dollar.
Tax Deduction: An expense that can be subtracted from your taxable income. It reduces your taxable income and, therefore, your tax liability.
529 Plan: A tax-advantaged savings plan to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions.
Additional Resources for You
We’d like to remind our readers that our esteemed lead attorney, Molly Rosenblum Allen, Esq., has meticulously crafted a range of resources to assist you during challenging times. These resources cover a wide array of topics to provide you with in-depth knowledge and support:
Las Vegas Divorce Attorney: Navigate your divorce in Las Vegas with expert legal advice and support. Discover More
Alimony in Nevada: Understand the specifics of alimony laws in Nevada and what it could mean for you. Learn About Alimony
Divorce and Mortgage: Find out how a divorce can impact your mortgage and what steps you can take. Explore the Implications
- Health Insurance After Divorce: Learn about your health insurance options following a divorce. Secure Your Health Future
Divorce and Bankruptcy: Delve into the interplay between divorce proceedings and bankruptcy. Navigate Financial Challenges
Student Loan Debt and Divorce: Understand how student loan debt is treated and divided in a divorce. Manage Your Educational Debt
How Much is Alimony in Nevada?: Get a clear picture of what to expect regarding alimony payments in Nevada. Calculate Your Alimony
Divorce Attorney Fee: Learn about the costs associated with hiring a divorce attorney and how to manage them. Plan Your Legal Expenses
Who Gets the House in a Divorce in Nevada: Find out the legal considerations for property division, specifically your home, in Nevada. Understand Property Division
How to Not Get Screwed in a Divorce: Arm yourself with knowledge and strategies to protect your interests during a divorce. Safeguard Your Interests
Molly Rosenblum Allen, Esq. is dedicated to providing you with the necessary tools and information to navigate your legal journey. We encourage you to utilize these resources to empower yourself during these challenging times.
Offsite Resources You May Find Helpful
Here are some offsite resources with valuable information related to divorce and family law. These resources can provide further support and a broader understanding of what one may need to consider during the divorce process:
American Bar Association – Family Law Section: This section of the ABA provides resources on family law, including divorce, child custody, and support.
DivorceNet by Nolo: Offers a wealth of free information about divorce laws, the process, and divorce professionals across the United States.
National Parenting Organization: A resource dedicated to promoting shared parenting and ensuring the best interests of children are served after separation or divorce.
The National Domestic Violence Hotline: Provides essential support and information for those experiencing domestic violence, which can be an aspect of divorce cases.
WomensLaw.org: A resource offering legal information and support to women facing various forms of domestic abuse or going through a divorce.
International Academy of Family Lawyers: An organization comprising lawyers recognized by their peers as the most experienced and skilled family law specialists in their respective countries.
These resources are not affiliated with The Rosenblum Allen Law Firm but can offer extensive additional support and information that readers may find beneficial.
A Special Message From Our Lead Attorney
Molly Rosenblum, Esq
Dear Readers,
Thank you for taking the time to explore our divorce resources. I hope you have found the information enlightening and helpful during what I know can be challenging and emotional.
Please do not hesitate to reach out if you feel ready to take the following steps or have any questions about your specific circumstances. My team and I at The Rosenblum Allen Law Firm are committed to providing the guidance and support you need to navigate this process as smoothly as possible.
To get the ball rolling on your situation, call (702) 433-2889. We are here to listen, understand, and work toward a resolution that serves your best interests.
Warm regards,
Molly Rosenblum, Esq.
