How Does Divorce Affect Your Taxes?
Alimony and child support do not count as taxable income or as tax-deductible expenses, but your divorce could affect the taxes on capital gains from the salary of the marital home or on income from a pension earned by one of the former spouses.
If filing your taxes is the most stressful legal or financial procedure of your life, you have never gotten a divorce. The divorce process can feel like a months-long tax audit, with the court scrutinizing your every transaction in the light least favorable to you. Once your divorce is finalized, you might head to the meeting with your tax accountant with a spring in your step, thinking that filing your taxes as an unmarried person will be child’s play compared to all the hassles of your divorce. You might be in for some unpleasant surprises, but you can avoid most of them if you word your divorce settlement in a way that resolves potential conflicts about taxes before they arise. The Fort Worth criminal defense lawyers at the Law Office of Kyle Whitaker can help you avoid tax-related conflicts with your ex-spouse by resolving them before your divorce becomes final.
Alimony, Child Support, and the IRS
If the court orders you to pay alimony to your ex-spouse, the money you pay still counts as your income for tax purposes; it is not a tax-deductible expense. Likewise, if you receive alimony from your ex, the IRS does not count it as taxable income. The same rules apply to child support.
Only one parent may claim the divorced couple’s minor children as dependents in one year, but couples and family law courts decide on a case-by-case basis which parent it should be. In some cases, the wealthier ex-spouse claims them, but in others, the financially disadvantaged spouse does, in the hopes of reducing the child support burden on the wealthier spouse. Some couples agree that Mom will claim the children as dependents in odd-numbered years and Dad will claim them in even-numbered years, for example.
Capital Gains Taxes on the Former Marital Home
Many couples sell their houses during divorce proceedings. If the house has appreciated in value, the couple may owe capital gains tax. If the house appreciated by $500,000 or less from the time of purchase until the time of sale, then you are exempt from paying capital gains tax.
Qualified Domestic Relations Orders (QDROs)
A QDRO is a court order that instructs a retirement pension to make payments to the former spouse of the pensioner. The divorce court might order you to pay your ex-spouse a portion of your pension check each month; if this is the case, you can save money on taxes by obtaining a QDRO during your divorce case.
Contact the Fort Worth Law Office of Kyle Whitaker About Representation in Your Divorce or Child Support Case
Hiring a family law attorney can make the process of property division and reaching an agreement about the financial support of your children much less painful. Contact the Law Office of Kyle Whitaker in Fort Worth, Texas to discuss your case.