Complications of separation and divorce include tax matters, which may not be immediately apparent to Boston spouses dealing with the daily stresses attached to ending a marriage. Tax implications occupy every possible divorce issue, whether it's spousal maintenance, child support, custody or property division.
Under Massachusetts and federal income tax laws, the status of a marriage on the last day of the year determines filing status. Your options include married filing jointly, married filing separately and under some circumstances, head of household. Married taxpayers who are otherwise qualified may file as head of household if they have been separated from a spouse for more than six months.
An adviser will explain the advantages and disadvantages of filing statuses as they pertain to your particular situation. When you file jointly, you and a spouse are responsible for any taxes owed, even if the burden was created by only one spouse. However, with sufficient proof, an "innocent spouse" may be relieved of his or her part of the joint debt through an Internal Revenue Service exemption.
Alimony and child support also create tax changes. The spouse who pays alimony may take a tax deduction, but the recipient must claim the support as income. Child support payments are not deductible nor are they taxable to spouses who receive them. Specific tax rules also apply to gay spouses, child dependency claims, marital home sales and additional property like retirement plans, stock portfolios and other investments.
The financial decisions you make during divorce will have both immediate and long-term effects. A divorce settlement involving both alimony and child support can be structured to maximize the tax benefits for both former spouses.
A legal representative should be prepared to help you understand and sort out tax problems caused by divorce. Choosing a lawyer who understands divorce-related tax laws helps you avoid having to hire a separate tax adviser.