Tax season has been delayed this year because of changes to the IRS's computer software, and while this holdup may have been frustrating for some, for those who are in the midst of a divorce in Maryland it may have given them the time they need to sort a few things out.
Divorce comes with a number of tax implications. First, depending on when a person divorced or is planning to divorce, this may affect their chosen tax filing status. Second, the division of assets during divorce can have a significant impact on one's tax liabilities, and this should be taken into account during the divorce process.
One thing that has no effect on federal taxes is child support. The parent who pays child support may not deduct this and the parent who receives child support should not report this as income. Alimony, on the contrary, is deductible by the payer and reportable as income by the payee, and as such the tax implications of this should be considered when determining spousal support.
Spousal support is just one of many things that should be examined closely for tax effects during the process of negotiating a divorce settlement. Homes, business assets, investment portfolios and retirement accounts may all generate certain types of taxes or tax breaks.
Because every divorce and every set of assets and debts involves its own unique concerns, it is important for those who are going through a divorce to ask their family law attorneys about tax issues. In some cases, family law attorneys may choose to involve accountants or other specialists to ensure that a client's interests are as protected as possible.
Source: The Wall Street Journal, "New Tax Rules Complicate Divorce," Arden Dale, Jan. 31, 2013