The Tax Implications of Divorce: Part 3 - Post-Divorce Planning

Adam Waitkevich (alt)

Adam Waitkevich, CFP®, CDFA™, ADFA™, Certified QDRO Specialist™ November 11th, 2024

For high-net-worth individuals, understanding the tax implications of divorce is especially crucial for maintaining financial stability post-separation. Let’s look at some of the essential tax considerations that you should be aware of as you enter this new stage in your life, from updating asset ownership to long-term financial planning.

Update Asset Ownership and Liabilities

One of the first things you should prioritize after finalizing your divorce is updating titles and transferring ownership of properties, investments, and other assets that have been awarded to you in the divorce settlement. Be sure to validate that all transfers comply with the terms of the agreement to avoid future disputes or tax complications.

Revisions to Alimony and Child Support

Alimony and child support are obligations that can significantly impact your tax situation. It is important to note that recent changes in tax laws have altered how alimony has traditionally been treated. Alimony payments are no longer tax-deductible for the payer, nor are they considered taxable income for the recipient as of 2019, so it’s essential to review and adjust these payments to reflect these changes.1

For child support, note that these payments are neither tax-deductible by the payer nor taxable to the recipient. However, understanding how these payments fit into your overall financial plan will still be important for you and your former spouse.

Tax Filing Status

Your tax filing status will most likely change post-divorce, potentially impacting your total tax liability and eligible benefits.

Choosing the appropriate filing status (single, head of household, etc.) can significantly affect your tax bill, so be sure to consult with a tax professional to determine your optimal filing status based on your new circumstances.

Additionally, be aware of potential changes to tax credits and deductions that you may no longer qualify for. For instance, if you have children, only one parent will be able to claim the child as a dependent, meaning the other party will likely be subject to increased tax liability.

Long-Term Planning

Once your divorce is finalized, long-term planning becomes even more crucial. Prioritize updating your financial strategy with an emphasis on tax efficiency to help ensure greater long-term stability post-divorce. If you do not already have a comprehensive financial plan in place, consider working with an advisor to develop a strategy that is tailored to your new situation and financial goals.

A New Beginning

As you enter this new stage in your life, be sure to keep your tax and financial planning strategies top-of-mind and recognize that it requires careful planning and ongoing adjustments to adapt to your changing lifestyle and goals.

Not sure where to start? Reach out today for a consultation and retake control of your financial future.

1IRS.gov, August 20, 2024

Read More By Adam Waitkevich, CFP®, CDFA™, ADFA™, Certified QDRO Specialist™

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Wealth Partners, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Concord Wealth Partners. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Wealth Partners is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Concord Wealth Partners’ current written disclosure Brochure discussing our advisory services and fees is available upon request or on our website. Please Note: If you are a Concord Wealth Partners client, please remember to contact Concord Wealth Partners, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Join The Conversation

Contact Us

Give us 15 minutes to listen to your situation, then we will connect you with an advisor ready to help you reach your financial goals.

This field is for validation purposes and should be left unchanged.