This time of year, it is often important to consider the tax implications of filing for divorce.
In both federal and state taxes in Minnesota, you cannot file jointly if you are divorced before the end of the year. If your divorce is finalized in 2014 (signed off by the Judge, not just filed), you are deemed divorced and can only file separate, individual returns. If you hold off and divorce in the beginning of 2015, you can still file jointly for 2014.
Everyone’s financial situation is different. Whether or not it is financially beneficial to file jointly or separately in any given year varies with each couple. However, some things to consider regarding taxes include:
- Spousal maintenance payments (deductible to the payer and income to the recipient)
- Distribution of any investments or retirement distributions are often taxable
- Property taxes and interest on mortgages may be shared or their benefit maximized with one or the other claiming the deductions
- If filing separately, status of Head of Household or Single may impact the tax burden
- How to utilize dependency exemptions
You should consult with your tax planner on the financial implications of divorce date. If you decide it is better to wait to divorce until 2015, you can still sign and finalize your decree this year – you should just hold off on filing it. The agreements are binding but you may be able to maximize your tax benefit.
A good collaborative divorce attorney and financial neutral can assist in reviewing these implications as well.
More Collaborative Law Posts