How Will Divorce Affect My Taxes?

 Posted on February 27, 2023 in Divorce

It is tax season, and if you are getting a divorce, you are probably thinking the timing could not have been worse. A divorce is not only emotional, but it comes with its share of financial challenges related to tax considerations. This stressful time may divert focus away from important decisions that could affect the taxes you pay. At the The Law Office of Linda Risinger, we help clients with every aspect of their divorce, including figuring out their tax implications and helping identify potential advantages.

Filing Tax Returns

Marital standing impacts everything from your filing status to whom you can claim as a dependent. If your divorce is not final yet, you may be able to file a joint tax return even if you no longer live together with your spouse. This could be advantageous, because it may make you eligible for a higher standard deduction when you combine your income with your spouse on the same tax return. On the flip side, when you file jointly, you will both be liable for all taxes due, even on income that your spouse earned.  

Child Custody and Impact on Tax Obligations

According to the IRS, one parent is allowed to claim a child as a dependent each year. If you have more than one children, you can claim one, the deductions for different children may be divided between you and the other parent. Usually, the parent with primary custody is eligible for exemptions and credits that can reduce their tax liability. In some cases, a parent with a lower income may agree to give up the exemption and allow the parent with a higher income to gain the benefits of claiming the child as a dependent.

Child support payments are not tax-deductible by the paying spouse nor are they taxable for the receiving parent. It is important for divorce negotiations to cover the potential tax liability of the paying parent and remain compliant with IRS rules.

Spousal Maintenance

Spousal support is not tax-deductible if it is provided for in a divorce decree dated January 1, 2019, or later. Any spousal maintenance payments ordered in decrees from 2018 or earlier remain tax deductible.

Assets and Tax Implications

Dividing assets and property should also be a top consideration due to potential long-term tax implications. In general, divided marital property is not subject to immediate taxes during the process of dividing assets, but maintaining the property in the years to come may impact your tax liability. Assets such as 401ks, IRAs, and pensions through employment should also be taken into account during the divorce proceedings.

Contact a Denton County Divorce Tax Considerations Lawyer

At The Law Office of Linda Risinger, we understand that divorce is a financial transaction. During this emotional time, it may be hard to focus on certain aspects that will likely have major tax implications in the future. That is where our experienced Collin County divorce attorney can help you. We will make sure you understand the tax-related issues that you will need to address, and we will advise you on how to make decisions that will protect your financial interests. Call 972-294-6533 for a free consultation.

Sources:

https://www.irs.gov/newsroom/some-tax-considerations-for-people-who-are-separating-or-divorcing

https://www.irs.gov/taxtopics/tc452