5 Tax Considerations To Keep In Mind When Getting Divorced In Florida

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Divorce is a financial process as well as a legal one, which means that taxes will inevitably be part of your divorce (whether you’ve realized that yet or not)!

If you’re getting divorced in Florida, keep these 5 tax considerations in mind:

  • Your filing status
  • Claiming dependents
  • Alimony/child support
  • Selling the house
  • Dividing retirement accounts

Let’s take a closer look at each of these 5 tax considerations and what you need to know about each of them if you are considering divorce or have already begun proceedings!

First – do you really need to think about taxes? Won’t your lawyer or accountant just take care of them?

We get that divorce is a huge undertaking, and you have a million things to pay attention to. If you’re getting divorced, you will need to focus on the big picture in order to have the best chances at a smooth process and successful outcome, but you can’t just forget the small details completely.

Ultimately, working with legal and financial professionals can help you take care of those small details, but YOUR life is going to be the one impacted by the final outcome, so you need to stay informed and aware of the strategy driving your divorce.

Hopefully, you find a knowledgeable divorce lawyer and accountant you trust, but regardless, you need to know what questions to ask and what matters need to be addressed to set yourself up for the best possible future financially. Taxes are a detail, but when it comes to the IRS, they’re not just a small matter!

Knowledge is power – and protection. Here are 5 tax considerations to keep in mind when getting divorced in Florida.

1 .   Your Filing Status

Determining your filing status should be one of the first things you do when it comes to making decisions about taxes and divorce (or really, finances and divorce in general!).

If you are still legally married at the end of the previous calendar year, you cannot file as a single person for your taxes for that year – you are still considered married when filing. For example, if you are still married on December 31st, 2024, but your divorce is finalized on (let’s say) January 15th, 2025, when you file your taxes in March or April of 2025, you can’t file as a single person (for your 2024 taxes).

So, what are you supposed to do? You have a few options:

One is that you can file “married filing separately”. This is the option that is usually the safest and makes the most sense, as each spouse is responsible for their own taxes. You report your own income, deductions, credits, etc., and so does your spouse, but you do so as individuals. Obviously, if you have gotten divorced or are in the process of doing so, this keeps things distinct!

Benefits of married filing separately: 

The main benefit of married filing separately is that it means you are not responsible for your spouse’s irresponsibility or shady financial activity, if any is present – you are not on the hook for them. If they did not get enough withheld from their paycheck, for example, you won’t owe more money if you file separately.

Drawbacks of married filing separately:

The biggest drawback of filing this way (and the reason many couples do not choose to file this way) is that it’s more expensive. You’ll each probably end up paying more in taxes than you would if you had filed jointly. However, it might be a better alternative than paying for your ex’s tax mess later on.

Your other options are to file jointly or to file as head of household. The main benefit to married filing jointly – to reporting your combined income and deducting allowable expenses – is that it will most likely save you and your spouse money. The downside would be, as we just explained, you are still liable for your spouse’s taxes.

You can file as head of household if you are:

  • Currently not married
  • You pay more than half of the costs of supporting your household
  • You live with the family members you support for more than half of the year (anyone you can claim as an exemption).

Head of household status means that you can claim a higher standard deduction amount than married filing separately, but not as high as married filing jointly.

If after reading these options, you’re still not sure which may be right for your unique situation, your attorney or a tax professional may be able to help you weigh the pros and cons!

2 .   Claiming Dependents

If you’re getting divorced or are already divorced, it’s important that you know that only ONE parent can claim qualifying children (lived in the home of the parent for more than half of the year) as dependents – either you or your spouse. You can’t share, or split up, tax benefits for one child on respective tax returns. If you have multiple kids, you may potentially be able to claim different children, but this is unlikely because of the rules around qualifying children; it could also prove extremely complicated.

So, which parent gets to claim the kids?

Generally, it will be the custodial parent – the parent with whom the children spent the greater number of nights during the year. If the child spent an equal number of nights with both parents (for example, maybe 181 nights with each parent and 3 nights with grandparents) the custodial parent would be the parent with the higher adjusted gross income. However, parties can agree otherwise in a Marital Settlement Agreement.

You MUST communicate with your spouse about this so both of you do not end up claiming your children if you are filing separately. The IRS will likely flag both returns so they can determine which claim takes priority, so everything will get slowed down, and there may be additional penalties.

At our firm, we encourage parents to “settle where they can, fight where they must” and this is one of those areas where settling may make more sense. Ultimately, the goal here isn’t to make the other parent pay more in taxes, even if you very much dislike them or want to get back at them (which is usually a counterproductive attitude in divorce anyway!); it’s to keep more money available for the kids. For example, it may make the most economic sense to let the other parent claim the children because they would get a tax benefit from it whereas you may not. A lawyer or financial professional like a tax specialist can help you think through this issue and determine the best course of action.

3 .  Alimony/Child Support

Alimony, or spousal support payments, and child support payments are not taxable income. They are not subject to tax, nor are they tax deductible by the payer. This means that when you calculate your gross income for your tax return, you shouldn’t include any child support or alimony payments received. (Alimony used to be taxable, but has not been since December 31, 2018.) What you end up paying or receiving in alimony or child support will be exactly that, without taxes! You don’t necessarily have to do anything with this information, but it may help ease your mind when it comes to paying and receiving these payments if they are a part of your divorce.

4 .  Selling The House

Acquiring assets during your divorce is, in most cases, tax-free, because it is a transfer from your spouse. This includes the house. If you end up with the house in the divorce, you don’t pay taxes that year because it is not a taxable event, but if you sell the house, you will likely pay taxes on any gains made (if you have capital gains in excess of the capital gains exclusion on a primary residence, which is $250,000 for a single person and $500,000 for a married couple, and if you have lived there for two out of the last five years). If the house is sold as part of the divorce, this may also affect the taxes you pay. Getting the house may not seem as big of a win when you consider the tax implications, so be sure to discuss the matter with your attorney and accountant or other financial professional!

5 .  Dividing Retirement Accounts

If your retirement account is divided in your divorce according to the terms of your divorce agreement or according to a court order, if or when you liquidate the retirement account you are likely going to have to pay taxes on the withdrawal. Understanding how retirement and taxes go together can be complicated; this is one of the areas where you need to be super careful and aware of your options, and you may have several.

Here are some other considerations about retirement accounts and taxes in divorce:

  • If you receive payments under a qualified domestic relations order (QDRO), which entitles your ex-spouse to a portion of your retirement account balance, you have to include them in taxable income unless you roll them over into a traditional IRA. Amounts included in income aren’t subjected to the 10% early distribution tax.
  • If you are divorced or legally separated at the end of the tax year (not the calendar year!) you can not deduct contributions you made to your former spouse’s traditional IRA.
  • You can transfer assets from your IRA into your spouse’s, tax-free. Again, though, when assets are withdrawn by you or your spouse, that is a taxable event!

Let Divorce & Mediation Law Firm l Cabanas Law Firm Help You Make Smart Choices

Getting divorced isn’t going to get rid of your tax problems or of taxes in general, but it also doesn’t have to unnecessarily complicate how you pay taxes if you have the right team on your side to help you understand the tax considerations of getting divorced in Florida. Our law firm can help give you peace of mind that you are setting yourself and your children up for future financial success! Call 954-447-2580 today to request your Free 15-Minute Case Evaluation and discuss your options with us.

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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.

Divorce & Mediation Law Firm | Cabanas Law Firm
18503 Pines Blvd, Suite 301
Pembroke Pines, FL 33029
(954) 447-2580
https://cabanaslawfirm.com

Author

Sergio Cabanas, Esq. founded the Cabanas Law Firm in 2006 and provides Divorce and Family legal services, as well as Estate Planning, to ensure his clients have planned for their newly single life and are protected after their divorce. He began his career in law in 1992 as a prosecuting attorney at the Broward County State Attorney’s Office, then continued his litigation track as an insurance defense attorney defending medical professionals against medical malpractice claims and expanded into disability and life insurance claims. Sergio is a Certified Mediator registered in the Supreme Court of Florida and a frequent speaker in the community about the importance of Estate Planning to keep families out of probate court and to prepare essential instructions in the event of disability or incapacity.