The Financial Realities Of Divorce

The Financial Realities Of Divorce

Even the most amicable divorces happen at great cost to those involved. Keep the following expenses in mind when planning out your post-divorce finances.

Income Taxes on Alimony

If your ex is paying you alimony, then you must report that alimony on your annual tax return. Know that your alimony is not free and clear— you will likely have to pay taxes on it. Check with an accountant to help you estimate what percentage of the alimony may be taxed. On the other hand, child support is not taxable. Some couples agree to make post-divorce support nontaxable and nondeductible; discuss this arrangement with your lawyer and your ex to see if this arrangement might work for you.

Finding and Furnishing a New Place

Only one of you can keep the house or apartment you shared. A new apartment or rental house will require a security deposit and the landlord will likely need the first month’s rent up front. Utilities, Internet, cable, and phone bills can add up quickly, even if you’re living alone. Did most of the furniture stay in the old place? If so, you’ll need a new bed, perhaps a sofa, a table, a few chairs, and other furnishings. There are also essentials to consider like dishes, silverware, lamps, clocks, and a vacuum. If you have kids who will be visiting, they will also need the comforts of home they’re used to. If the idea of all-new furniture is daunting or won’t fit within your new budget, check used goods stores and yard sales for gently used furniture and household goods.

Lifestyle Choices

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Living on a single income might affect how much you can spend on treats for yourself. Divorce is a good time to rethink some of your habits and choices; consider cancelling your gym membership in favor of working out at home or biking to work. Maybe it makes more sense to skip the morning latte and drink coffee at home. Make an honest appraisal of expenses that could be shifted, postponed, or eliminated. You don’t have to get rid of everything you love, but try to pare down to the essentials.

Health Insurance

If you had health insurance through your spouse’s coverage, you will need to find your own insurance coverage after your divorce. COBRA is available to you for a total of 36 months after the divorce is final, but it can be very expensive. Check with your employer about your healthcare options. If you’re under 26, the Affordable Care Act, or ObamaCare, allows your parents’ healthcare provider to cover you as a dependent; consider asking your parents to take you back on their dependent coverage.

Parenting Time Trips

If you and your ex share custody of the kids, the cost of transporting them back and forth may be surprising, even if you both live in the same city. Gas, parking, tolls, and more frequent car maintenance will add up quickly. If the kids need to fly to spend time with the other parent, consider the cost of airline tickets, particularly if they will be flying during peak travel season, such as holidays and weekends. Consider investing in a more fuel-efficient car, and use a rewards credit card or airline miles if the kids will be flying often.

Child Care

If one parent stayed home with the kids and that parent is now returning to work, someone still has to stay with the kids. Daycare is expensive, and many quality after-school programs for older kids can be costly. Be prepared for this added expense. Check around your area for free or inexpensive after-school programs for older kids run by local groups. Some companies have day-care facilities; if you’re job hunting, see if these services are available to new employees. Ask family members, trusted friends or neighbors if they can watch the kids for free or for a small fee.


If you and your ex have kids in college or about to enter college, you will need to plan for how those expenses will be divided. Will you each contribute half of the tuition or will you both contribute in other ways, such as letting your child live at home instead of in the dorms? Encourage your kids to apply for scholarships, keep their grades up, and work at part-time jobs to cut down on their expenses. Both parents should do everything they can to support their student financially, whether it’s helping out with the cost of textbooks or mailing him or her a supply of favorite foods each month.

Divorce can be a trying time for a family, and a shifting financial landscape is inevitable. By considering some of the hidden costs of divorce ahead of time, you can ease the transition for your whole family.

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