Texans going through a divorce are likely overwhelmed on many different levels. Many couples neglect to think about how their custody, support and asset division agreements will impact their taxes, but they can — significantly. The decisions you make after you and your spouse split up and during your divorce can have a significant impact on future taxes. Here are a few things to consider and discuss with your financial and legal advisors.
If you are not officially divorced on Dec. 31, you and your spouse can still file a joint return. If the divorce is final, you have a child or other dependent living with you for more than half the year and paid for more than half the cost of the house, you can file a return as a head of household. There is also a married-filing-separately status. Your tax advisor can tell you which is best for you.
If you are named the custodial parent of your children or they lived with you more than with your ex-spouse, you can claim them as dependents. You may also be able to claim other exemptions such as the child credit. Even if you aren’t able to claim them as dependents, you can claim a child-care credit for caring for a child under age 13. If you pay any or all of your child’s medical bills, you can claim those as medical expense deductions.
It’s important to keep track of asset transfers, including those involving retirement assets. If you received assets from your spouse in the divorce, you don’t have to pay capital gains on them until and unless you transfer them. Then you will likely owe capital gains on the change in value from their original purchase by the other spouse to your sale of them.
Of course, alimony payments have tax implications both for the payor and payee. It’s important that both of you understands exactly what is stipulated as alimony so that your reporting is consistent.
It’s probably wise to seek guidance from a professional tax preparer before filing your first taxes after you and your spouse split, and then again for the first taxes after your divorce. Your Texas family law attorney may also be able to provide some guidance in avoiding unexpected tax consequences as you work through your divorce settlement.
Source: Kiplinger’s Personal Finance, “Tax Planning for Getting Divorced” Jan. 05, 2015
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