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Tax Effects of Divorce or Separation

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While divorce can be a sad and trying time for families, understanding the financial impact of the separation going into it can make you feel like you have some control in the process. The IRS published a helpful list on the tax impact of a divorce or legal separation. Here's a good list of key tips to understand if you get divorced: 

Child Support.  If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.

Alimony Paid.  If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony. This applies only if the payments qualify as alimony for federal tax purposes. If the decree or agreement does not require the payments, they do not qualify as alimony.

Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.

Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse's traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.

Name Changes.  If you change your name after your divorce, notify the Social Security Administration of the change. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov. The name on your tax return must match SSA records. A name mismatch can delay your refund. 

This can be a challenging time, but knowing the financial effect can help guide you in the right direction. Hope this helps!

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