Protecting Your Family's Future
 

Understanding the Tax Implications of Divorce

Understanding the Tax Implications of DivorceDuring a divorce, your focus is on custody and visitation, child support, alimony (perhaps) and the division of marital debts and assets. It may not even occur to you to consider the potential tax consequences until the divorce is finalized. But thinking about the tax impact beforehand can benefit both parties.

The Treatment of Child Support and Spousal Support for Tax Purposes

With both child support and alimony, one of the parties is receiving income from the other. However, for tax purposes, the two types of payment are treated differently.

Under IRS rules, child support payments are not considered as income by the recipient. Accordingly, the person paying child support cannot claim any kind of deduction for the payment.

As a general rule, however, spousal support qualifies as reportable income and must be included on state and federal tax returns, as long as the payments are made because of a valid divorce or separation agreement, and the payments are monetary—gifts of real or personal property, or services (gifts in kind) are generally not taxable. If the payments qualify as income to the recipient, they can also be deducted by the payer.

What Filing Status Should You Claim?

If your divorce in still in process at the end of the tax year, you can still choose to file a joint return, or you can file as “married filing separately.” However, if the divorce decree is entered before the end of the tax year, you must file as either single or as “head of household.”

To claim your children as exemptions on your return, you must generally be considered the custodial parent. In most instances, the parent with whom the child spent the most amount of time will be considered the custodial parent for tax purposes. You can, however, claim your child if the custodial parent waives the exemption in writing.

Contact Us

At the office of Linda Stewart Law, PLLC, in Baytown, we bring more than 8 years of experience to clients in south Texas. To learn how we can help, call our office at 281-761-6042 or contact us online. We offer an initial consultation at a reduced fee of $50. We accept credit cards and will set up a payment plan, if appropriate. Our offices are open Monday through Thursday, from 9 a.m. until 5 p.m., and until noon on Fridays. Evening and weekend appointments can be arranged upon request.

Se Habla Espanol | ASL and ESL Services Also Available

Speak Your Mind

*

 
Stewart Law PLLC