Hi and welcome back to our discussion about tax topics that your divorce attorney really should be talking to you about. Yes, we know – divorce is a very stressful time and you already have a lot on your plate, so you don’t want to think about things like taxes. But as we mentioned in the previous article, taxes have an impact on your future finances, which makes them very important. The IRS is not going away. So while we completely understand the fact that you’d rather focus on topics that feel relevant right now (like alimony and child custody agreements) figuring out your tax filing status and filing your income tax returns properly are critical. We’d like to make sure, if you’re getting divorced in Ingham, Eaton or Clinton Counties, that you’re fully prepared to handle every aspect of your divorce. Including your federal tax return as we as your state of Michigan taxes. So here goes…
Tax Topics You Need to Know About:
- Spousal support payments count as income, but they’re not taxable
Spousal support, which many people call ‘Alimony‘ here in Michigan, is a form of income. However under new laws, spousal support payments made by one spouse to another aren’t treated the same way as other income when you file your taxes. The Tax Cuts and Jobs Act tax legislation changed the way alimony is paid and received after divorces in the US. Specifically, in any divorce finalized after January 1, 2019, alimony is not taxable to the recipient, and there is now no tax deduction available for alimony paid out. (Remember – this doesn’t apply to any divorces finalized before January 1st 2019. In those cases, alimony still qualifies as taxable income to the person who received it from their ex.)
- If you have a dependent child, you may want to file as “Head of Household”
Tax law says you can file your taxes using the “Head of Household” filing status if you’re officially divorced, or at least legally separated by the end of the tax year, or if you and your spouse didn’t live together for the last six months of the tax year. You also have to have paid more than half of the costs of maintaining your household, and your children must qualify as dependents, and live in your home for more than half of the year. In most cases, the “Head of Household” filing status ends up being more financially advantageous to you than using the “Single” or “Married Filing Separately” filing statuses. However, everyone’s financial situation is a little different, so you need to check with your divorce attorney (or your accountant at tax time) to make sure that this applies to you. These same rules apply to your tax filing state when your file your Michigan income tax return with the state.
- Overpayments on prior tax returns can be split between spouses
If there were overpayments on taxes made on your previous year’s tax return, those funds will be returned to you by the IRS as part of this year’s tax return. However, if you were married when the overpayment was made, and now you’re divorced, the IRS requires that you and your ex agree on how those funds will be allocated when they arrive. It’s important to remember that the IRS doesn’t care how the funds are divided up, as long as you attach an explanation for the allocation you’ve chosen to the tax return when you’re filing it. In most cases, spouses in Okemos, Holt and Howell decide to split the funds equally between them, but that isn’t always the case, and it doesn’t have to be. Talk to your divorce attorney about options available to you in this situation.
- Are your attorney’s fees tax deductible?
While there were many aspects of the Tax Cuts and Jobs Act legislation that many people liked, one of the changes it made that weren’t as well received related to attorney’s fees. By repealing the deduction for legal fees for individual taxpayers through January 1st, 2026, the Tax Cuts and Jobs Act made it impossible for anyone getting divorced in the next five years to deduct their divorce attorney’s fees on their federal taxes. However, the rules are different if you paid an attorney to help preserve your business during the divorce case. Again, check with a CPA or tax advisor. The Internal Revenue Code is pretty complex.
The best divorce attorneys help you deal with EVERY aspect of your divorce
Whether you live in Dewitt, Grand Ledge, Lansing, Dimondale or Jackson, the skilled divorce attorneys at The Kronzek Firm can help. Our family law team has decades of experience helping the people in mid-Michigan with every aspect of their divorces, from custody and child support, to alimony, prenups, and even personal protection orders. If you’re considering ending your marriage and you want help from a well respected divorce lawyers with experience handling hundreds of divorce cases, call 517 866 1000 to schedule your free phone or Zoom consultation. We’re available 24/7, including nights and weekends for emergencies.