Taxes after divorce can get . . . messy. Here are seven tax tips for the newly unmarried

2024-12-25 00:21:37 source:lotradecoin community forum discussions category:My

If you and your spouse divorced in 2023, you will have to learn a new set of rules for paying taxes in 2024.

Just like divorce itself, taxes after divorce can get messy. We’ll focus on seven broad tips, drawing on the experts.

Determine your filing status

If your divorce became final before the end of 2023, you can’t file a joint return, according to H&R Block.

If the divorce wasn’t final by year’s end, you still have the option to file jointly, according to TurboTax. You can also file separately as a married couple.

If you file jointly, you and your ex-spouse will need to decide how to handle any tax liability or refund, Northwestern Mutual advises.

Alimony and child support

Starting in 2019, alimony payments made under divorce agreements cannot be deducted by the spouse who pays them, nor are they taxable for the spouse who receives them.

The same goes for child support payments: the spouse who pays them doesn’t get a deduction, nor does the recipient pay income tax.

Children and other dependents

After a divorce, only one spouse can claim a child as a dependent.

You can continue to claim a child as a dependent after a divorce if they lived with you more than with your spouse, which makes you the custodial parent.

As custodial parent, you may qualify as head of household (see below) and be able to claim several tax benefits, including the Earned Income Tax Credit and the child and dependent care credit, H&R Block says.

The parent who claims a child as a dependent can claim the Child Tax Credit and the American opportunity or lifetime learning higher education credit, according to TurboTax.

Head of household

If you’re providing a home for a child after a divorce, you could qualify as head of household, which might lower your tax liability.

To file taxes as head of household after divorce, according to H&R Block, you must have been considered unmarried on the last day of 2023. You must have paid more than half the cost of keeping up your home for the year. And you must maintain a home for a “qualifying” person, such as a child or other relative.

Asset transfers

When divorce transfers property from one spouse to the other, the recipient does not pay tax, according to TurboTax.

However, if the recipient later sells the property, they will pay capital gains tax on any appreciation, even if it accrued before the transfer.

Home sales

If divorcing spouses sell their home, they may face capital gains taxes, TurboTax says.

The law generally allows a seller to avoid tax on the first $250,000 of capital gains on the sale of a primary residence. Married couples who file jointly can generally exclude up to $500,000.

Tax season can be terrifying.Here's everything to know before filing your taxes in 2024.

Transfer of retirement savings

Be careful with retirement savings in a divorce, TurboTax warns.

If you cash out your 401(k) and give the money to your ex-spouse, you’ll be stuck with the tax.

To avoid that hit, complete a Qualified Domestic Relations Order, which delivers the funds to the spouse and lifts the tax burden.

More of your 2024 tax season questions answered

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Your single largest payday may be a 2023 tax filing away. File early to get a refund sooner

Is it better to pay someone to do your taxes or do them yourself? We'll help you decide.

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What is net pay? How it works, how to calculate it and its difference from gross pay

Daniel de Visé covers personal finance for USA Today

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