If they are considering or going through a divorce, most couples in the Gulfport area will need to think about the tax consequences of their decisions. Just about any divorce could affect a person’s bottom line on their federal income taxes in a couple of important ways.
First, the couple will no longer be able to take advantage of the married, filing jointly status when submitting their income tax returns. This status is unavailable starting in the tax year that a couple finalizes their divorce. For example, if a couple finalized their divorce on December 31, 2022, they will not be able to submit a married, filing jointly return this April 15. The change could lead to additional taxes.
Note that simply thinking about divorce, moving into a separate home or even having a divorce case pending does not close off the possibility of a married, filing jointly return. Under such circumstances, it still may be better to submit a separate filing.
Families with minor children will need to think about who claims dependents
People of all walks of life get significant tax benefits when they are supporting their minor children or other dependents. Couples going through a divorce will need to think about which parent will claim these benefits, as the IRS only allows one parent to do so. The IRS’s default is that the parent who cares for the child most of the time gets the tax break.
However, parents are free to agree as part of their divorce settlement as to who will claim the exemption and, thus, get an important tax savings. No matter what the agreement says, if a parent who is entitled to this benefit is going to surrender that right, the IRS expects them to sign an official form to that effect.
Some couples may have to consider other tax issues as well
Some couples in the Gulfport area, including those who own multiple homes or who have a share in a business, may need to think about how their divorce will affect their capital gains liability in the future. Even though divorce settlements themselves are not usually taxable, a person will be subject to tax if they later go to sell the property they got to keep in a divorce. Retirement plans also present tax issues.
The bottom line is that when thinking about the legal consequences of a divorce, a resident of Mississippi’s coastal region should not forget to ask questions about taxes.