Ohio residents who are getting divorced should be aware of the potential tax consequences of ending their marriages. For instance, the timing of the divorce could determine a person’s filing status for the previous tax year. Those who are still married at the end of the calendar year will still likely file a joint tax return. However, if the marriage ends before the end of the calendar year, an individual will file a single return.
Those who file a separate return may not be eligible for the dependent care or other tax credits. The Tax Cuts and Jobs Act (TCJA) changed the tax treatment that alimony receives at the federal level. If a divorce was finalized after the final day of 2018, alimony is not considered income by the federal government. Furthermore, alimony can’t be deducted for federal tax purposes.
However, the old rules may still apply at the state level. If a divorce decree was amended after the first day of 2019, alimony falls under the new rules set forth by the TCJA. Tax deductions for certain legal fees were also eliminated by the TCJA. Those who are liquidating assets might have to pay capital gains taxes, and income taxes may be owed on retirement assets not split per the terms of a qualified domestic relations order.
Those who are thinking about ending their marriages may want to consult with an attorney experienced in divorce and other family law topics. Legal counsel may be able to help a client learn more about keeping a family home, obtaining child support or retaining parental rights to a child.