Tax Issues That Can Affect Your Massachusetts Divorce
Divorce represents a major life change for the parties involved. There is the emotional impact of ending the marriage itself. There are the practical consequences of each party rebuilding their lives as single people. And of course, there are also the financial consequences of unwinding what was, in many respects, a legal partnership.
These financial consequences include taxes. While most people do not enter the divorce process with the tax implications at the top of their agenda, it is something that needs to be understood and considered. Here are just a few common tax issues that can affect your Massachusetts divorce.
Changes in Filing Status
Married couples file their federal and state tax returns as either “married filing jointly” or “married filing separately.” If you are legally separated or divorced by the end of the tax year (usually December 31), your filing status changes to “single” unless you remarry before December 31 or qualify to file as “head of household.” Regardless, your new filing status can change your tax liability as well as the deductions you may be entitled to claim on your return moving forward.
Claiming Dependents
IRS regulations only permit one parent to claim the tax benefits associated with a minor child or other dependent. In general, the “custodial parent,” i.e., the parent with whom the child lives with for the greater number of nights during the tax year, is entitled to claim that child as a dependent. In cases where the child lived with each parent for an equal number of nights, the IRS considers the custodial parent to be the one with the higher adjusted gross income. That said, the custodial parent can sign a written agreement allowing the non-custodial parent to claim any exemption related to the child.
Alimony and Child Support
Prior to 2019, alimony was considered taxable income under federal and Massachusetts law. This meant that the recipient had to report alimony payments as income, and the payor could claim those same payments as a deduction. Under changes to federal law, however, alimony payments made under a divorce agreement signed starting in 2019 are no longer subject to these rules. Massachusetts adopted a similar change effective in 2022.
In short, if you get a divorce in 2026, the spouse paying alimony cannot deduct such payments on their taxes, and the spouse receiving alimony does not have to report such payments as income on their taxes. As for child support, such payments are also not considered taxable income. The parent receiving child support does not report it as income, and the parent paying support cannot claim it as a deduction.
Contact a Peabody Divorce Lawyer
Taxes are just one of many legal and financial considerations you need to think about when getting a divorce. Fortunately, you do not have to deal with these issues on your own. Our Peabody divorce lawyers are here to provide assistance and guidance. Call Reade Law Firm, PC, today at 978-767-8383 or contact us online to schedule a consultation.