Tax Issues in Divorce
Divorces are often quite complicated. If a couple has been married for any length of time, they have acquired assets and built a life around the relationship. Among the more overlooked matters that need to be addressed in the divorce are tax implications. Your Bryan divorce attorney can provide you with valuable guidance on this matter, but the following provides an overview of some of the issues that need to be considered.
Spousal and Child Support
Certain items in a divorce settlement may be deducted for tax purposes. For instance, the payer can deduct spousal support paid in the tax year, but not child support. Conversely, the payee must claim spousal support as part of his/her income. The custodial parent is allowed to take a dependency exemption, though, provided the child lives with this parent for the majority of the year. An exception can be made if the custodial party signs away her rights to claim the child as a dependent.
How to File before Divorce
Until the divorce is finalized in court, the State of Texas recognizes a couple as married, regardless of whether or not they live together. During this time a married taxpayer can file one of several ways:
- As head of household
- As married, filing jointly
Once the divorce is final, of course, both parties must file separately. For this reason, in some cases, it may be in the best interests of the involved parties to wait until after January 1 to finalize the divorce.
Retirement Accounts and the Family Residence
Two of the largest assets for divorcing couples are the home and any retirement accounts. Both parties will need to come to an agreement regarding who takes possession of the home. In exchange for this, more of the other material assets will generally be awarded to the other party. One party might feel that an equitable exchange is to offer the main wage-earner's retirement account in exchange for the home. There are usually tax implications for either of these transfers, so it is important to work with an attorney who can find the best strategies for saving you tax costs.
Be Careful of Tax Implications in Your Divorce Settlement
It is very important for divorcing couples to have a clear understanding of any tax issues that can arise. A Bryan divorce lawyer can guide you through these matters and help you save unnecessary costs. Call Peterson Law Group today to arrange a consultation at 979-703-7014 or 936-337-4681.