Collin County Tax Considerations Lawyer

Attorney in Frisco, TX Addressing the Tax Implications of a Divorce

Divorce is a major financial transaction. As such, it can have serious tax implications, including some pitfalls that the team at the Law Office of Linda Risinger can help you avoid. In addition to the immediate tax implications of divorce, there are longer term impacts involving taxes and divorce.

Who Gets to Claim Tax Exemptions and Credits for the Children?

Short-term considerations may include the agreements relating to claiming tax exemptions or tax credits for the children of the marriage. Exemption for dependents can be one of those emotional issues that is not worth debating in the big picture. It may make more sense for the parent with little or no income, for example, to sacrifice the exemption to a parent for whom it will be meaningful, conditional on support obligations. Creative negotiation can be useful in this case.

Make Sure You Understand Your Alimony-Related Tax Obligations

Recent changes to the United States Tax Code have had a substantial impact on divorce proceedings that involve alimony, also called spousal maintenance in Texas. Until a few years ago, alimony was taxable for the recipient and tax-deductible for the payer. For new divorce decrees, alimony payments are no longer deductible by the payer nor are they taxable for the recipient. (If your divorce decree was entered before January 1, 2019, the old rules still apply.)

Child support is neither taxable nor tax-deductible. With this in mind, it is important for your divorce negotiations to cover the potential tax liability of the paying party so that he or she can remain in compliance with IRS rules.

Be Aware of Tax Implications When Dividing Complex Assets

Divorcing couples with significant assets need to be acutely aware of the potential tax implications involved in dividing investments and property. Division of assets like 401(k)s, IRAs, fixed, variable and joint annuities, and pensions through employment (government teacher's and military pensions) require careful attention.

One spouse may not want to settle for the house in exchange for the retirement account, for instance, when the long-term implications are made clear. The same goes for the division of business assets. Careful tax planning is imperative, and cooperation may be beneficial for both parties.

We Work Hand-in-Hand With Financial Experts

We are not tax advisers, so we do not fail to enlist the support of professionals. We work hand in hand with tax advisers and financial experts on a daily basis when negotiating divorce agreements. With careful planning, our goal is to ensure that the settlement protects our client's tax interests and preserves the wealth that you're taking out of the marriage for the future.

In addition to working carefully with financial experts, we focus on making clear our strategy, agreeing on goals and valuation methods, and getting you the best outcome possible.

Contact Our Divorce Attorneys

For more information about our firm and how we can help with your case, contact our office. Call 972-294-6533 for a free consultation. Our team serves clients in Collin County, Denton County, Dallas County, and throughout North Texas.