You and your partner decide to get divorced. A difficult time where a lot of aspects have to be arranged. Most of the time, first steps are taken by going to a lawyer and/or a notary who can assist with the handling of the finances. Here you arrange how the finances will be split. You can also include alimony in these arrangements, for both your ex-partner and your children. Divorce and partner alimony, how does it work tax wise?
Divorce and partner alimony
In the year of divorce you can choose whether you and your ex-partner would like to remain tax partners. Remaining tax partners is beneficial if you for instance own a house together. When you remain tax partners, the deductible costs can be allocated in the most beneficial way. The assets can also be allocated in the most beneficial way, if you remain tax partners. This does mean that you have to be on decent terms with each other, as financial information is shared. The result of a joint tax return, you can of course split 50-50 yourself.
Joint tax return or not
If you and your ex-partner are not on decent terms, then above might cause an issue. It is therefore also possible to file separately. Each person claims their part of the property or the assets and pays the taxes accordingly.
Once you know whether you would like to file jointly or separately, you would have to consider what information would be required in order to file your taxes.
The tax return includes the general information, such as your income, your main residence and your assets. On top of that, you might be paying partner- and/or child alimony. Child alimony is not tax deductible as children are considered a (tax)burden. Partner alimony on the other hand, is tax deductible if it is stated in the divorce agreement made either by court or a notary.
Conditions alimony tax credit
If you are paying partner alimony as stated in the divorce agreement, you are allowed to deduct this in your tax return. Meaning, that the paid partner alimony will lower your taxable income, hence this will most likely result in a refund.
If you are receiving partner alimony, you are obligated to include this as income in your tax return. Very likely, that this will result in too pay tax.
Tax is Exciting
We think tax is exciting. The annual income tax return in the first 2 years after the divorce is maybe less exciting for you. Such tax returns are not straight forward. Feel free to reach out if you require assistance and we are able to assist you and your ex-partner with filing your tax returns!