Property division, parenting plans, child support - with so many things to contend with during a divorce case, tax considerations often get put on the back burner. If you are planning to divorce, it is very important that you understand how the divorce will influence your tax obligations and prepare appropriately. Educating yourself about tax-related matters now can help you avoid unpleasant surprises and unexpected fees later on.
Tax Filing Status
Once the divorce is finalized, you and your spouse will file taxes separately. During the divorce process, however, you may still be allowed to file jointly. If your divorce was not finalized in the previous year, you can file jointly. Filing jointly may allow for a higher deduction and therefore, a larger refund. If your divorce decree was issued on or before December 31, you cannot file jointly for that year.
Tax Considerations for Retirement Accounts
There are tax penalties and fees associated with early withdrawal from retirement accounts. If your or your spouse has a retirement account and contributed funds to it during the marriage, part or all of the retirement funds are likely marital property. To avoid penalties and tax implications when dividing retirement accounts make sure you use the appropriate legal process and orders for dividing shared retirement funds. Typically, this involves a qualified domestic relations order (QDRO).
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