It’s a sad fact that some marriages will end eventually. Even sadder is the number of people who become wrapped in financial difficulty because of their emotional turmoil. A divorce can lead to major financial challenges like increased housing costs, child support payments, alimony, and legal fees. It’s worth taking a few minutes to consider these questions during the process of a divorce, and in a clearheaded manner. It’ll be difficult to achieve the focus required for the rational answers you need, but if made well, the decisions will pay off for both parties in the long run.
This article from The Wall Street Journal offers the very practical advice from a financial columnist based on his own experience. Quoting the article:
Ten years after our marriage broke up, my ex-wife and I aren’t exactly friends. But we still have to make a lot of joint decisions—and we make them without acrimony.
And the author goes on from there, with some very practical, thoughtful advice on ending a relationship without destroying livelihoods.
Take as much of an active role in your divorce decree as you did in the creation of your marriage. Finding the end of a relationship in clear terms is equally as important as finding its beginning.
Understand that alimony is deductible to the payer’s taxes and taxable to the payee’s. If you’re paying, you don’t need to itemize it to file a deduction. It’s considered an “above the line” deduction. Payees can pay either taxes monthly, or pay the entire lump sum yearly.
Conversely, child support cannot be claimed as a deduction for the payer, and does not need to be claimed by the payee. If you’re the custodial parent, you can claim your child as a deduction. Likewise, the non-custodial parent also can claim the deduction, but he or she needs the consent of the custodial parent. That can be done with Form 8332 from the IRS. If there’s any confusion, the IRS may have cause to disaffirm the rights of either parent.
To qualify as Head of Household, you’ll need to meet some qualifications, like these:
Be aware of the legal ramifications of your divorce. The IRS views all three endings to a marriage—divorce, annulment, and legal separation—the same. The way your taxes will be affected depends upon the wording.
A divorce means that you and your partner must separate, not end up destroying each other in court, despite the stereotypes. The more people walk away from a divorce unharmed, the more winners there are.
Here's some practical advice about divorcing without anger.
