Consider These Important Tax Questions During Your Texas Divorce Negotiations

 Posted on August 11, 2022 in Divorce

Couples seeking a divorce in Texas are often so focused on making sure their assets are split evenly that they forget to consider that other things besides assets can have a major impact on their future finances. A great divorce decree will make sure that assets are not only divided fairly, but that spouses are set on an equal footing moving into the future as well. 

This is where the tax implications of divorce come into play. While you may not file your taxes for a year or more after finalizing your divorce, you can bet that your divorce will be reflected in your next filing. Avoid unpleasant surprises by asking yourself these three questions about taxes as you negotiate your Texas divorce. 

Are You Splitting Roth and Tax-Deferred Accounts? 

Roth IRAs and Roth 401(k)s do not get tax deductions when you put money into the accounts, but the contributions are not taxed upon withdrawal if the money has been in the account for at least five years and the owner is over age 59 and a half upon withdrawal. In contrast, tax-deferred accounts like 401(k)s and traditional IRAs offer tax benefits up front but can have hefty withdrawal taxes and fees later on. If you are dividing these both in your divorce, consider your future plans carefully and whether you might need liquidity anytime soon. 

Are You Claiming Child Tax Exemptions? 

Dependent tax exemptions can stack up to make for major tax savings at the end of the year. But which parent gets to claim the kids? This can be part of your financial negotiations and parents can be flexible when making arrangements; perhaps parents rotate claiming all their children every other year or split the exemptions evenly each year. If you do not decide, the parent with the majority of parenting time is generally the person who gets to claim the kids, potentially leaving the parent earning an income in a bind. 

Are Alimony and Child Support Taxed? 

As of January 2019, neither alimony nor child support payments are deductible as an expense, nor are they includable as part of the receiving spouse’s income. This can make a big difference in the paying partner’s net resources, so it is important to know this ahead of time. 

Talk to a Denton, TX Divorce Attorney

The decisions you make during your divorce can have far-reaching effects on your future. Avoid costly mistakes by seeking sound legal advice from the experienced Denton County divorce attorneys with The Law Office of Linda Risinger. We make protecting your best interests our business and fight to pursue a divorce strategy that meets your needs and preferences. Call us now at 972-294-6533 to schedule a free, confidential consultation. 

Source: 

https://www.forbes.com/sites/heatherlocus/2022/05/20/critical-tax-facts-in-divorce/