As Texas residents move through the process of ending their marriage, one of the things that is most often overlooked involves how one’s tax landscape will change once the process is finalized. There are a number of important changes that will affect each spouse’s tax obligations. Understanding those changes early in the divorce process can make it easier to negotiate.
The most obvious change involves each spouse’s filing status. In the eyes of the IRS, a taxpayer is considered unmarried during the entirety of the tax year in which their divorce was finalized. That means that individuals will no longer have the option of filing under either of the “married” designations.
For those in Texas who are required to make alimony payments as part of their divorce, those payments are tax deductible. Parties who receive alimony are likewise required to reported those payments as income, and pay taxes on those funds. In order for a divorce payment to be considered alimony, certain requirements must be met. Not all payments from one spouse to another qualify as spousal support.
For Texas spouses to make the most of their upcoming tax return, it is important to make divorce decisions that are in line with one’s financial needs and goals. It can be easier to reach a favorable divorce settlement once an individual understands the full range of outcomes associated with various divorce decisions. If an individual has a complex tax return, it may make sense to schedule a consultation with the financial pro who handles preparing and filing one’s return.
Source: madison.com, “Getting Divorced? Here Are 4 Ways Your Taxes Will Change“, Wendy Connick, Sept. 24, 2017