How to File Taxes After Divorce in NC

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After filing taxes together as a married couple, you may be confused about how to file alone following a divorce. It can be complex to file taxes after a divorce in North Carolina. There are some key concepts you need to know.

A knowledgeable divorce lawyer can help you end a marriage and consider the critical implications of that separation on your taxes. You need to consult someone who knows North Carolina’s divorce and tax law.

Call Breeden Law Office at (919) 661-4970 for a consultation of your case.

How Does Divorce Affect Taxes?

When you were with your spouse, you likely filed your taxes as a married couple. There are many benefits to filing your taxes as a married filing jointly, including an increased standard deduction. But you still have many tax options that can be beneficial after a divorce.

After a divorce, you can file your taxes in the following manner:

  • Single – This applies if you get a divorce anytime during the year and are unmarried as of December 31.
  • Head of Household – This applies if you provide a home for your child, and it can reduce your tax liability.
  • Married Filing Jointly – If you remarry before December 31, you can file jointly with your new spouse.

Are There Benefits or Deductions After a Divorce?

Some different deductions and benefits exist for each filing category. In most cases, filing as head of household is the most beneficial after a divorce.

Children and Tax Benefits

When you file taxes with children, you can qualify for several credits and/or deductions, especially if you file as head of household. Some of the benefits you may be able to claim with children include:

Who receives the tax benefits depends on the child custody arrangement and divorce agreement. In most cases, you must be a custodial parent or have primary physical custody. Some divorce agreements or parenting plans allow each parent to claim the child in different years.

Child support is also a consideration on taxes after a divorce. The payer cannot deduct child support payments, which do not count as income for the receiving parent. However, the IRS may offset a tax refund for unpaid child support.

Spousal Support Deductions

Alimony is no longer a deduction on the payer’s taxes according to the Tax Cuts and Jobs Act of 2017 (TCJA). It is also not counted as income for the spouse who receives payments.

This new alimony rule applies to divorces and legal separations after December 31, 2018. It also applies to any divorce or separation that occurred on or before December 31, 2018, but modified after that date if the modification indicates that TCJA amendments apply.

Spousal support and alimony established in agreements before January 1, 2019, is deductible from income by the payer. It is also taxable income from the receiver of payments.

Property Division

The equitable distribution of property can be complex in North Carolina. You should consider the tax repercussions of acquiring property and assets in the divorce.

When determining the division of marital property, you should:

  • Identify property as being marital or separate
  • Assign a fair market value to the marital property
  • Determine how to divide marital property between spouses equitably

For most people, a home is the most valuable marital asset. For this reason, resolving who will get the house and other high-value items in a divorce is complicated. However, in some cases, you can sell the home and divide the proceeds, or one spouse can buy out the other. No matter which option you choose, there are tax implications.

  • If you make money on the sale of the home, you may have to pay capital gains tax.
  • If you buy out your spouse and remain in the home and then later sell the home to a third party, you may have capital gains tax in the later sale.
  • If you remain in your marital home, you may be able to deduct the mortgage interest from your taxes due.

It’s important to remember that whoever is listed as the owner of the home on the date that property taxes are reported will be responsible for paying those taxes, regardless of your divorce agreement.

IRAs and Pensions

In a divorce, spouses must deal with other valuable assets, including retirement accounts, such as Roth IRAs, 401(k)s, and 403(b) funds. These retirement accounts are typically treated as marital property and must be divided equitably in a divorce.

Vesting schedules for employer-sponsored pensions and retirement accounts can significantly impact the overall value of an account at the time of separation and going forward. For example, if the account is only 25% vested upon divorce but becomes 100% vested later, this will have tax implications.

It’s best to avoid splitting retirement accounts in a separation agreement. Instead, you might consider buying out other assets and one person retaining the retirement account to avoid the negative tax repercussions of withdrawing early.

How Can an Experienced Divorce Attorney Benefit You?

When figuring out taxes after a divorce, your best option is to contact a lawyer familiar with all relevant laws. You need someone to help you determine how your separation agreement will affect your taxes in the future. Don’t leave it to chance.

Although the goal is always an equitable distribution, a lawyer can ensure you consider tax implications. You don’t want to end up with a property you cannot pay taxes on.

Call Breeden Law for Help Filing Taxes

The legal professionals at Breeden Law Office can help you understand your options for the division of property, spousal support, and other elements of divorce that can significantly impact your taxes. Contact us today at (919) 661-4970 or use our online contact form to reach out and schedule a consultation.

Get Help Filing Taxes After Your North Carolina Divorce

Filing taxes can be complicated, but when a divorce is thrown into the mix, you might feel overwhelmed.

Attorney Jonathan Breeden with the Breeden Law Office is ready to hear your case and help you to ensure you properly file your taxes.

Call (919) 661-4970 to schedule your consultation.

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Divorce In North Carolina: What You Need To Know

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