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Income is not the only financial change after a divorce

When a marriage ends, numerous financial changes are inevitable. After a divorce, each spouse's income needs to stretch further and each of them often has fewer assets. Most people consider these issues when negotiating a settlement or preparing for court. Texas residents face other financial issues as well that should be considered, however.

Taxes need to be considered in any settlement negotiated by the parties. First, for federal income tax purposes, if the couple was still legally married on Dec. 31, taxes for that year can still be filed as married. If the divorce is final by Dec. 31, each party files as single for the entire year -- even if the divorce was final on Dec. 31.

If a Texas couple has children, one of the agreements they need to make concerns who claims the children in any given tax year. The courts will often support whatever arrangement the couple makes as long as one party does not receive an unfair advantage. Furthermore, alimony payments are typically deductible to the party making them and income to the party receiving them. No tax advantage or disadvantage is associated with child support since those payments are for the children's well-being.

These are just some of the tax considerations a couple needs to address during the divorce process. Other issues such as the family home and retirement accounts also have tax issues that require attention. The primary goal of most settlement agreements is to provide a fair and comprehensive settlement. That might not be possible unless the tax ramifications of the decisions each party makes are considered.

Source: Dan Caplinger, "Here's How Your Taxes Changed if You Just Got Divorced", Dan Caplinger, March 2, 2017

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Vernier & Associates, PLLC Vernier & Associates, PLLC

Vernier & Associates, PLLC
2441 High Timbers Drive Suite 110
The Woodlands, TX 77380

Phone: 281-882-3271
Fax: 832-585-0955

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