By Debra Schoenberg
More than two million couples in the U.S. get divorced every year and one of the top three reasons for splitting up is finances. The COVID-19 crisis has left many families struggling to cover basic expenses as the number of unemployment claims surge to 6.6 million.
As early as this week, millions of individuals and couples will get a one-time stimulus payment to help boost the economy. While divorcing couples are figuring out how to divide up their marital property, the stimulus checks will be another asset they need to split.
Individuals making $75,000 or less will receive a $1,200 stimulus check and couples that make $150,000 or less will get checks totaling $2,400. Californians are getting an additional $600 in weekly benefits. The federal rebate is cut by $5 for each $100 in income over those thresholds, and eventually payments phase out for individuals making more than $99,000 and for couples making more than $198,000. Taxpayers with children will also receive another $500 per child.
The best way to determine how much you are entitled to is by looking at your most recent tax filing. If your divorce is finalized and you’re filing taxes separately with children, only one person can claim a child and whoever claimed the child on the tax return will get the $500.
If your divorce case is still in the court system or you were legally married as of Dec. 31, 2019, you must file your federal tax return as a married couple with the option of filing jointly or filing separately. If you’re going through a contentious divorce with a lot of distrust it may make more sense to file separately and pay more in taxes. Then you and your spouse will receive two separate stimulus checks.
For divorcing couples, the division of property is often hard because it’s can be emotionally charged. It’s not uncommon for one spouse to have managed all the assets during the marriage while the other spouse had very little idea or understanding of the finances. Or another example is both spouses shared control of the marital assets but have seen stock portfolios plummet during these uncertain times.
California requires an equal division of all marital property. The court can either divide property in half which is called an “in-kind division” or it can award one item of property to one spouse and compensate this award by giving the other spouse an equally valued property item.
Community property is a term recognized in several states including California which means each spouse holds an equal, undivided one-half interest in all the property acquired during the marriage. In most cases, unless there’s an exception, each spouse will receive one half of the community property in the divorce.
If you have a unique situation, you should reach out to your tax professional or CPA. The federal and state filing deadline for tax returns has been extended from April 15 to July 15, 2020.