Financial repercussions can be a major concern for Maryland spouses considering filing for divorce. From the division of assets to dealing with spousal support, there can be major impacts on each party’s finances caused by the end of a marriage, and the stress around these issues can be equal to or even exceed that caused by the practical and emotional fallout of a split. One additional financial concern following divorce that is less frequently addressed but is quite important for future finances is the impact of divorce on annual tax filings.
The year after a divorce goes into effect, both parties’ tax filings for the prior year will be affected. Therefore, if a divorce is finalized prior to December 31 of a given year, it will need to be reflected on each spouse’s tax returns for that year, and each party should file separately. However, if the divorce was not finalized until the new year or the couple is only legally separated, they should continue to file as married.
There are also a number of tax impacts for the divorcing parents of children. There is a tax exemption for each dependent child, and that exemption is generally claimed by only one parent, the parent who is considered to be custodial or have the majority of parenting time. However, that parent can choose to sign a waiver giving the exemption to the other parent. Dealing with the tax exemptions can be part of the agreement in a divorce settlement.
A divorce lawyer may help answer questions about taxation after divorce, including the impact of spousal support on tax filings and the effects of asset transfers and property division or sale in the settlement. A family law attorney may be able to provide representation in all divorce matters as well as deal with the ongoing legal and financial reverberations following the end of a marriage.