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Divorce and Taxes: 6 Issues to Be Aware of - Issue #1. Marital Status

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There are two certainties in life: Death and Taxes. We've already written about how divorce and estate planning are interrelated, but what about divorce and taxes?

In all cases a divorce will affect some part of your tax return. In most cases there will be numerous changes in your income tax liability after your divorce and you should give consideration to what changes will take place because this could be a factor in determining the best divorce settlement for you. In some cases these changes may be complicated enough that your attorney should involve an accountant or certified financial planner to help analyze the different options. Our next five blog posts will explore the various issues raised by the interrelation of divorce and taxes so that you are at least aware of the issues to be on the lookout for.

Issue #1. MARITAL STATUS: The most obvious way that a divorce will affect your taxes is by changing your marital status. This is a change to your federal income tax return that will happen after every divorce case.

In Massachusetts, after the expiration of the Divorce Nisi waiting period (90 days from the issuance of the Judgment of Divorce Nisi) when the Judgment of Divorce becomes final you are officially divorced and you are no longer qualified to file a tax return as "married, filing jointly" or "married, filing separately". The key date for determining your tax year marital status is December 31. If your divorce nisi period crosses December 31, then you are technically still married in that tax year and must still file under a married status.

Obviously, marital status has a significant affect on your income tax liability and if you are scheduling an uncontested divorce hearing in the Fall you might want to consider whether it makes sense to schedule it early enough to change your status by December 31, or wait.

Click here to read Divorce & Taxes - Issue #2. Child Support v. Alimony.

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Comments

  1. Divorce AdviceMarch 14, 2011 at 7:30 AM

    It was great post, but i think different states different taxes

    ReplyDelete
  2. Kelsey & Trask, P.C.March 14, 2011 at 10:58 AM

    In response to Divorce Advice: The Nisi period described in the above post is specific to Massachusetts (though other states may have waiting periods as well). Although, the timing may be different from state to state on income tax returns, the change in marital status will affect your federal and state income tax return at some point. As indicated in our Disclaimer, to apply the law to the specific facts of your case you should consult with an attorney in your jurisdiction.

    ReplyDelete

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