When going through the divorce process in Montana, taxes might not necessarily be a huge area of focus. However, taxes can have a major impact on one's wallet. A few tips may help with navigating the world of taxes as it relates to divorce.
First, when it comes to child support, support payments cannot be deducted, and for those who receive child support, it will not be taxed. With regard to alimony -- or spousal support -- received, however, these payments are taxable in the year they are received. This type of support is not subject to withholding tax, so increasing the tax paid during the year may be necessary to avoid being penalized. This can be done by making estimated payments or boosting the quantity of tax withheld from one's wages.
For those paying alimony, they can deduct what they have paid to their former spouses under their divorce decrees. This is true whether or not they itemize deductions. However, any voluntary payments they make outside of their divorce decrees cannot be deducted. To deduct alimony, the paying spouse simply has to include his or her spouse's Individual Taxpayer Identification Number or Social Security Number on his or her Form 1040 at tax filing time.
Dealing with finances and taxes can understandably be confusing during divorce. Unfortunately, making a wrong move due to lacking knowledge about matters such as child support or alimony may end up being personally costly in the long run. However, an attorney in Montana can provide guidance at each stage of the divorce proceeding so that one's financial interests are ultimately protected.
Source: cbslocal.com, "Breaking Up Is Hard To Do: Don't Forget The Taxes!", Dee Lee, Sept. 1, 2017