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Thinking of taxes during divorce can help some save in the future

Tax season has already come and gone for 2014, but that doesn't mean that next year’s taxes should be ignored until the calendar rolls over. The status of a person’s marital status is based upon the previous year. If a Massachusetts couple was married on the last day of the year, then they file as married. If the divorce was finalized before then, each party will file as single. There are tax implications that may warrant careful attention to certain aspects of the divorce settlement.

For a divorcing couple that has children, they will undoubtedly have some sort of provision for child custody and support in their settlement. However, decisions concerning such shouldn't be made based on what an individual may believe will affect their taxes. In fact, neither the payment nor receipt of child support will affect a tax filing, as paying it can’t act as a deduction and receiving it isn't taxed.

Alimony is a different story, though. While alimony payments can be a vital tool for certain divorced individuals, the receipt of such is taxable as income. The spouse tasked with paying alimony can also deduct those payments come tax time.

While Massachusetts individuals might have their focus on a number of different details during a divorce, the following year’s taxes should also be given consideration for certain financial aspects. Decisions concerning custody plans and child support shouldn't have a bearing on taxes and generally, those receiving alimony might take into account the tax implications. Whether by setting aside money for future taxes on alimony payments or returning to court to have those payments lowered, thinking about the future can help a divorced individual financially prepare for one of the most taxing times of the year.

Source: Forbes, "The Big Money Mistake Divorcing Women Make", Kerry Hannon, July 3, 2014

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