Divorce may have outsize impact on couples’ tax status, liability

Wisconsin couples both married and unmarried may know that marital status has an effect on the taxes they have to pay. A wedding means it’s time for a change in their tax situation, but so does a divorce. Filing status may be the first change that comes to mind when thinking about how life events affect one’s tax burden, but sharing expenses and income as a married couple can have a large impact at tax time.

Financial planning experts frequently offer tips to taxpayers trying to figure out their new obligations to the Internal Revenue Service. They suggest what some may already know: Filing status is important for figuring one’s tax burden, possible exemptions and credits such as the one for earned income. Whatever a taxpayer’s marital status is at 11:59 p.m. on Dec. 31 of the year for which the return is being filed is that person’s status for the entire year. Until a divorce is final, each spouse still falls into the “married” column.

Being married or single isn’t the only filing status; should a household include a qualifying dependent, a single person can file as the “head of household.” When it comes to married couples, choosing to file a joint return means that each spouse shares equally in any tax liability imposed by the IRS. Married people can choose to file as “married filing separately” to avoid this commingling, but doing so may take away eligibility for certain credits as well as expose each spouse to higher tax rates.

Filing for divorce is just the first official step in dissolving a marriage. Important divorce legal issues such as property division, alimony and child support may still need resolution. Family law attorneys may be able to help divorcing spouses access resources that could contribute to an outcome agreeable to all parties as well as represent divorcing spouses in court proceedings as needed.

Source: Yuma News Now, “How Marriage And Divorce Can Impact Your Taxes”, April 05, 2014