Did you finalize your divorce in 2017? Did you have a marital home to deal with as part of your settlement? How you and your former spouse dealt with the family home during the proceedings impacts your income tax filings this April.
Even if you considered the tax implications of your decisions at the time, now that they are around the corner, you may need some guidance in making sure that you make the most of your tax situation and not pay more than you have to in taxes.
How did you deal with the marital home?
You may have followed many other people here in Connecticut and across the country and dealt with the marital home in one of the following ways:
- One of you bought out the other’s share in the home.
- One of you kept the home and refinanced the mortgage.
- The home was sold, and you both moved out.
- You delayed the sale until the children reach the age of majority.
- You both remained in the home to raise the children.
If you shared rental properties or a vacation home, you may also need to know how those properties, or the sales thereof, will affect your taxes. Numerous factors go into the treatment of your disposition of the marital home in the divorce. Failing to carefully consider all of them could cost you more in taxes than you intended when you signed your divorce settlement.
Handling your taxes in the first year after divorce
Most people tend to handle their income taxes on their own, even when that might not be a good idea. This may be especially true in the first tax year after your divorce. In addition to making decisions regarding the family home, you more than likely divided numerous other assets that may come with their own tax ramifications. For instance, you may need tax guidance with regards to the following:
- You liquidated long-term investments.
- You divided retirement accounts.
- You receive or pay alimony.
- You determined who would claim the children.
Since your divorce was finalized prior to or on Dec. 31, the IRS no longer considers you married, and your filing status changes. How you handled the transfers of your assets in accordance with your divorce settlement also matters. Did you complete all of the steps necessary to affect the transfer? Did you have all of the appropriate paperwork drafted and executed?
The answers to these questions also make an impact on doing your taxes for 2017. It may be beneficial to sit down with a tax law attorney who can guide you through the process of doing your taxes and making sure that you only pay the necessary taxes, if any at all, instead of finding yourself facing a large tax bill.