How Does a Divorce Affect Taxes?

There can be an overwhelming amount of items to consider when getting a divorce-fair asset distribution, parenting time, child support, spousal support, emotional stress, and trying to move forward with your life as quickly as possible. Taxes are likely one of the last things on your mind at this time. However, correctly filing your taxes is more significant than most consider at first. Engaging a CPA or financial planner at the early stages to work with your attorney can help work through any tax obligations and consequences of any support package you may receive as part of your dissolution of marriage.

Almost every facet of your divorce will affect how you file your taxes. Property division will affect taxes, depending if the division was a transfer of cash or physical property. For property transferred to a former spouse, there is no gain or loss recognized.

A child custody order can affect which parent may file with dependents. Child support payments cannot be deducted by the payer nor are child support payments taxable income by the recipient. This being said, any attorney fees relating to child support are tax deductible. If the parent who has custody of the child decides it is of no benefit to claim a dependent and the parents agree, the parents can trade the dependent exemption or release it to the other party completely.

Spousal support payments can be deducted by payer if certain conditions are met. On the flip side, the party that is receiving spousal support must report, and pay taxes on, the monetary support, as it is taxable. While Oregon refers to this money as spousal support, the IRS refers to it as alimony.

Other notable items that should be considered in your Portland Oregon divorce include your tax bracket, your filing status, reporting any name changes as a result of the divorce, reporting any change of address, changing your income tax withholding, filing a new W-4 form with your employer, making sure you know your ex-spouse’s social security number as you will need to report this on your tax return if you are going to claim spousal support, and knowing your tax options if you have retirement assets that need to be distributed.