If you’ve recently gone through a divorce, you know that untangling the web that’s formed by marriage can be messy. Going through the act of separating property, valuables, credit cards, bank accounts, and even time with the kids can take its toll on you. That’s why it’s important to be prepared for filing 2018 tax returns when you are divorced. While the task may seem small or insignificant there are a lot of things you must do differently when filing after a divorce. That’s why we’ve composed this list of tips and facts that every new divorcee should be aware of when filing in 2018.
Filing 2018 Tax Returns When You Are Divorced:
- There’s a new alimony update for the 2018 tax year. It’s always important to be aware of any changes in the tax laws and codes. For instance, this year there’s been a change to how you file alimony payments. If a divorce was finalized by January 31, 2018, there are no changes to the way in which you would handle federal income tax of alimony payments. If you make alimony payments, they can be written off on your 1040 form. These payments do not have to be itemized. The spouse receiving the alimony payments must list them as income for 2018. However, if your divorce was finalized after December 31, 2018, a new law removes the deduction for alimony payments. The spouse receiving these alimony payments will not be including them as taxable income.
- Know your filing status. If you are filing 2018 tax returns when you are divorced, you must know the status of your separation before filing. For instance, if you are already separated, but your divorced hasn’t exactly been finalized yet, you still need to file as ‘married’. You can file as Married Filing Jointly or Married Filing Separately. However, if your divorce was finalized by or before December 31st, you can file as Single or Head of Household.
- Remember to deduct IRA retirement contributions. If your divorce hasn’t been finalized or you are not considered legally separated by December 31 of 2018, you can deduct contributions to your soon-to-be ex-spouse’s IRA.
- Take advantage of Special Enrollment Periods in the Marketplace for health insurance coverage. If you’ve suddenly lost your health insurance due to a divorce or legal separation, you’re eligible to enroll in during the Special Enrollment period. It will show on your 2018 tax returns that you did indeed have insurance, but you lost coverage due to a major life event. This will help you to avoid paying any penalties for lacking health insurance coverage throughout the year.
- Understand how to claim dependents. If you are filing 2018 tax returns when you are divorced, and you have been named the primary custodial parent, you will claim the child or children as dependents. However, if you’ve been separated but your divorce has not been finalized, you can either file separate returns (Married Filing Separately) and you each can claim the child as a dependent on your returns, or you can file jointly and claim the child together.
- Remember that child support is different than alimony. Alimony and child support are not filed in the same way, despite the fact that they’re both payments to your ex-spouse. You cannot deduct child support payments on your 2018 tax return.
- Child Support payments are not reported as taxable income. Regardless of when your divorce or legal separation was finalized, you don’t have to report child support payments as income.
- Alimony payments can be deducted if you are filing 2018 tax returns when you are divorced. These payments can classify as a tax deduction if they are:
-in the form of cash
-authorized by court order for divorce
-not filed as a joint tax return for you and your spouse
-paid when you are your spouse are not living in the same primary address
-not part of a child support payment.
- You must report any alimony payments that you received. It’s important to remember that if you are an alimony recipient, you need to state these payments on both federal and state income tax returns. The new tax laws do not apply to you yet.
- Beneficiaries of transferred properties do not have to pay tax on the transfer. If you’ve received property from your ex-spouse, the transfer itself is not taxed. However, if you later sell that property, you will pay a capital gains tax.
For More Information on Filing 2018 Tax Returns When You Are Divorced
It’s always strongly recommended to have a tax expert assisting you when you file after a divorce. While the tax laws and codes are readily available to you, deciphering them in a way that works for you should be left up to a tax professional. To get more information on how to handle your tax returns this year, contact a trusted divorce attorney for all of the resources you need.