Divorce in Florida can take at least 30 days for the simplified and uncontested ones and years for more complicated marriages. The reason for all this time is that divorce is not just about ending your marriage; it is one of the biggest financial transactions in a person’s life, so tax implications naturally play a major role in it.
Tax filing status
While married, the IRS allows you to file your taxes jointly. But after your divorce, you will have to file as single or head of household. That means you’ll no longer enjoy deductions such as joint mortgage interest payments or exemptions for dependents you shared with your former spouse.
The division of assets between spouses during divorce proceedings may trigger taxable income for both parties. For example, the IRS considers alimony payments made by one party to the other taxable income. Also, any proceeds from selling a jointly-owned property will be subject to tax.
Once divorced, unreimbursed medical and dental expenses can become deductible if they exceed 10% of your adjusted gross income (AGI). However, if your ex makes payments for child or spousal support in accordance with a court order, the IRS may not include those amounts as part of your AGI.
As a divorced person, you may qualify for the earned income tax credit (EITC). This type of credit is generally available to individuals with qualifying children who don’t exceed certain income limits. Additionally, if you have sole custody of a dependent child or are responsible for more than half of their support, there’s also a chance of receiving the child tax credit (CTC).
Retirement benefits and investment accounts
Generally, retirement accounts are marital property (or part of it) subject to division upon divorce. This includes 401(k) plans, IRAs, Roth IRAs and other similar investments. The division of these assets will depend on the specific terms of your divorce agreement. For example, if your spouse were to receive a part of your 401(k), they would need to rollover the funds into their own retirement account. This can lead to complications such as early withdrawal fees and tax penalties.
Overall, it’s important to be aware of the potential tax implications of your divorce in Florida. By taking the necessary steps to protect yourself both before and after your divorce, you can reduce any potential complications or issues pertaining to taxes down the road.