Most Virginia residents know that a divorce can be emotionally draining. They also know that the outcome can severely affect their income. However, many people may not know that a divorce can also have a tremendous effect on their income taxes as well. That's because certain financial aspects such as child support and alimony can change the way that the government views their income and assets. So here is a quick look at how taxes can change after a divorce.
Capital gains are one tax area that can be affected by a divorce. Capital gains are what an asset such as a home is worth after its initial cost has been deducted. During a divorce, spouses should try to ensure that any property or asset that is divided between them has the same amount of capital gains for each of them. A spouse who has higher capital gains from an asset will incur a higher tax burden.
Alimony can also affect taxes for both spouses. If one spouse receives alimony from the other as part of their settlement, that money is considered taxable income by both federal and state governments. However, the spouse who pays out alimony will receive a tax deduction for this money.
A divorce can also affect the filing status of both ex-spouses. If the couple was still married on the last day of the year, they can still choose to file jointly for that tax year. However, if the couple got divorced after December 31st, then one of them may qualify to file as the head of the household, which does offer a tax advantage.
Child support is another area that can affect a spouse's taxes. However, any Virginia resident who is going through a divorce may want to speak with a family law attorney in order to determine how a divorce may change their tax situation.
Source: about.com, "What impact will your divorce settlement have on your taxes?," Accessed Jan. 24, 2016
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