Most people know the saying that death and taxes are the only two certain things in life. However, for some Texas residents, it may seem that divorce and taxes are just as certain. Individuals who are doing through the marriage dissolution process may find themselves closely considering the effect ending a marriage can have on their tax situations.
Alimony is often a sticking point during divorce, and with new changes to federal tax law, it may become an even more contentious point. As of now, the recipient of spousal support bears the obligation of paying taxes on the received amount, and the payor has the ability to deduct the amount from his or her taxes. However, after the end of 2018, that arrangement will reverse, and the payor will have the responsibility of paying taxes on the paid support.
Even changes to how children are considered on tax forms could impact divorce. Certainly, custody itself will likely remain the main issue for divorcing parents, but it may also be wise for parents to determine who will claim the children as dependents. In the past, having kids resulted in a higher personal exemption deduction, but tax law changes that will affect the years 2018 to 2025 gets rid of the personal exemption that used to increase with children.
While divorce may not be as inevitable as death, it still affects numerous Texas residents, and the tax implications do too. It can be a top priority for many divorcing parties to reach the best financial outcomes they can from their marriage dissolution proceedings. Fortunately, with the right information, assistance and planning, individuals can work toward the outcomes they desire.