While most residents of Texas who file for divorce understand their finances are going to change as a result, many do not consider the impact that divorce will have on how they file their taxes. The choices individuals make regarding their divorce will often have long term effects, so people should be proactive about reducing their tax burden. In addition to changing the status they can file under, divorce will also impact what deductions people have access to, especially if they have children.
Following a divorce, individuals are naturally no longer able to benefit from a married filing status. Some are still able to file as “Head of Household,” which usually carries a lower tax rate, but only if they meet certain criteria. Deductions related to children are another huge change in the way that divorced individuals can file their taxes, and the tax deduction for each child generally goes to whomever the child spends the most time with.
Child support is not considered a taxable income, and the parent who pays it is not able to write that amount off because it is considered their obligation. On the other hand, spousal support such as alimony can be considered taxable income in some situations, and it can be deducted by the person paying it.
It is not uncommon for divorces to be complicated, especially if there are children involved. For those who want to be able to have peace of mind regarding their future and finances in the face of a divorce, speaking with a divorce lawyer who can explain the impact of their decisions financially and legally may be beneficial.
Source: Huffington Post, “Preparing Your Taxes In The Year Of Divorce,” Kathleen B. Connell, March 21, 2013