When deciding to initiate divorce proceedings, individuals typically reflect and carefully consider their options. While there can be many reasons for choosing to terminate a marriage, it is vital to contemplate the various ways in which this decision will impact other aspects of life, such as finances. It is important to keep in mind that both the distribution of marital assets and a support order can potentially affect your tax status.
When filing a tax return, it is required by federal law to report all income earned. It is important to note that child support payments are not considered taxable income for the parent receiving the payments nor can they be deducted from the gross income of the parent making the payments, regardless of the number of children covered under the support obligation. In contrast, spousal support payments have historically been viewed as taxable income for the party receiving support and deductible from gross income for the party making the payments. However, changes in the federal tax law state that spousal support payments made after a divorce finalized in 2018 or later will not be considered taxable income for the recipient nor deductible from the gross income of the payor.
Important tax items to consider during the divorce process in Texas:
- Determining the Appropriate Tax Filing Status;
- When and Where to File the File & Finalize the Divorce;
- Tax Credits, and Who May Use Them;
- Tax Treatments of Alimony or Spousal Maintenance;
- Transfer of Property and Tax Consequences;
- Tax Carryovers; and Division of Retirement Assets.
When divorcing, it is not possible to file a joint tax return for the year. Therefore, during tax planning, it is crucial to determine whether to file taxes jointly or separately. If you file separately, you will be solely responsible for your individual tax obligations to the IRS, without sharing the responsibility for your estranged spouse's tax obligations. Nevertheless, filing separately may lead to a higher tax rate and prevent you from claiming specific deductions.
It is also vital to establish who can claim a child as a dependent on their tax return if you and your spouse have a child. If no court order specifies who can claim the child, and you cannot agree, typically the parent with physical custody of the child for the majority of the time can claim the child.
When divorcing couples jointly own property, such as real estate, there are generally no tax consequences if one spouse transfers the property to the other pursuant to their divorce agreement. However, if the marital home is going to be sold, it may be more advantageous to do so before the divorce is finalized, as most married couples are eligible for a greater capital gains exclusion than single individuals.
The taxation of retirement funds from a 401K or pension that are being divided between divorcing spouses depends on the manner in which they are distributed. It is important in most cases to have a qualified domestic relations order to define each party's tax obligations and prevent any need to pay taxes in connection with the division of the retirement plan.
Getting in touch is easy. Use the form below and request a free consultation today.
In order to best prepare yourself during the divorce process, it is vital that you have a
qualified divorce attorney by your side. Our divorce law firm is dedicated to providing knowledgeable, professional, and effective legal counsel for all types of
family and
divorce matters. When you work with our experienced Dallas family law attorneys, you can trust that we will have your best interests in mind.
At Wilson Whitaker Rynell, our attorneys possess the expertise and experience necessary to evaluate how various tax planning options in divorce may impact your tax situation, and we can assist you in determining the most advantageous course of action for your individual circumstances. Our firm represents clients in divorce cases in various Texas cities, including Dallas, Austin, Houston, Fort Worth, and all cities within Dallas County, Tarrant County, Collin County, and Denton County.
Recognized in the legal industry as dedicated board-certified lawyers and Rising Stars.
Your project will be handled by legal experts every time. You will have the most experienced attorneys working for you.
Let's talk about your legal issue
Wilson Legal Group P.C.
d/b/a Wilson Whitaker Rynell
(972) 248-8080 (Dallas) MAIN OFFICE
(713) 830-2207 (Houston) Appointment Only
(512) 691-4100 (Austin) Appointment Only
For more information on how we can assist in your intellectual property, commercial litigation, divorce, or other personal needs, let us know how we can help you:
WILSON WHITAKER RYNELL
Thank You for Contacting Us!
Your information has been sent, and we will contact you shorlty...issues.
WILSON WHITAKER RYNELL
Oops, there was an error sending your message.
Please try again later.
Disclaimer:
This form does not establish an attorney-client relationship, and should only be used to contact the firm about scheduling a call or meeting. No confidential or sensitive information should be sent using this form.
We represent clients nationwide, including Dallas, Austin, Houston, and other Texas areas such as Fort Worth, Arlington, Carrollton, Plano, Allen, Lewisville, Flower Mound, Irving, Denton, McKinney, North Richland Hills, and all cities within Dallas County, Tarrant County, Collin County, and Denton County.
Wilson Whitaker Rynell
16610 Dallas Parkway, Suite 1000
Dallas, Texas 75248
972-248-8080 (MAIN)
972-248-8088 (FAX)
info@wrrlegal.com (E-MAIL)