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Tax Implications of a Divorce: What You Need to Know

By Michael DiFalco

Divorcing from your spouse brings a host of changes to your life and finances. Most immediately, the property you acquired while married to your partner will be split between the two of you. If you do not get primary custody of your children, your ability to see them and participate in their upbringing will also be impacted.

Another significant change that is often overlooked by divorcing couples relates to taxes. Failing to account for how a divorce will impact your tax liability can lead to some unpleasant surprises when tax season rolls around. 

Top 5 Ways Divorce Affects Your Taxes

Here are the five most significant ways divorce in New York can impact your taxes:

1. Filing Status

First, you will no longer be able to use the Married Filing Jointly filing status or take advantage of its generous standard deduction. However, if you are the primary custodial parent of your child following divorce, you may be able to use the Head of Household status to file your taxes. Otherwise, you will need to use the Single filing status and its accompanying smaller standard deduction.

2. Claiming Children as Dependents

Absent an agreement between you and your partner, the parent with whom your children primarily reside will get to claim them as dependents. This gives the custodial parent a significant tax advantage over the non-custodial parent. The child support formula gives the non-custodial parent an additional credit since they are not able to claim their children as dependents. 

3. Child Support

Many parents who receive child support payments depend on such payments to make ends meet. However, these payments are not considered income, and you are not allowed to report them as income on tax returns. Similarly, the parent paying for child support does not get any special deduction or tax credit for having to pay support.

4. Spousal Support

Spousal support is handled in two ways under federal law and New York law. Due to a recent change in federal tax law, you would no longer include spousal support payments as part of your gross income. Similarly, if you are ordered to pay alimony, you cannot deduct these payments for purposes of your federal tax liability. This change went into effect beginning with the 2019 tax year.

However, New York state law treats spousal support payments differently. When filing your state income tax return, you should include any amount of spousal support you receive as taxable income. If you pay alimony to your ex spouse, then you can deduct the amount you paid on your tax returns.

Most agreements will clarify that spousal maintenance is not taxable, but it is important to consider the tax consequences when negotiating a divorce agreement.

5. Tax Credits

In addition to claiming the child as a dependent and receiving the Child Tax Credit, custodial parents can claim the Earned Income Tax Credit as well. Additionally, they may be able to claim the Child and Dependent Care tax credit if they pay for child care so they may work or look for work. These tax credits are generally not available to non-custodial parents and can provide additional tax benefits to the custodial parent.

Contact Aiello & DiFalco and a Garden City Divorce Lawyer About the Effects of Divorce

At Aiello & DiFalco, your Garden City divorce lawyer is committed to ensuring you understand the many ways in which a divorce can impact your life in the short term and long term. Not only this, but we will work diligently on your behalf throughout your divorce to help protect both your financial and personal interests.

Get started today by contacting a Garden City, NY, family law attorney at Aiello & DiFalco to request a consultation.

About the Author
I am a partner at Aiello & DiFalco LLP, and my priority for my clients is to guide them through an arduous court case to provide them with the opportunity to write the next chapter in their life. I tailor my approach to each client’s priorities and positions, and to the extent that matters can be predicted, I will always provide a realistic perspective of how the law could be applied to the particular facts and circumstances of a case. Since I thrive on helping people and solving problems, I bring an optimistic and positive approach to practicing in a very difficult area of law. With more than a decade of experience handling hundreds of cases, I have the ability to get results on the issues my clients view as priorities. When cases or certain issues cannot be settled, I have a solid record of success at trials, hearings, and on appeals. Feel free to contact me for a free initial consultation, I am always available to help.