Filing for and obtaining a divorce means considering the short-term and long-term impacts of dissolving your marriage. One of the major areas of your life that will undergo some change after your divorce is related to filing taxes. Unfortunately, taxes are not a pleasant subject to think about in general, so you must contend with the unpleasant nature of divorce and tax questions. However, if you want to consider all the information that will be relevant to your case and life then taxes figure into that discussion prominently.
Your status as a tax filer will immediately change after your divorce. Rather than filing as married filing jointly or individually you will become an individual tax filer. With that change in designation comes a change in the rules that are associated with how you file your taxes each year. Not understanding these changes will negatively impact your finances and the overall quality of your life during a time when you will also be transitioning into a post-divorce lifestyle.
Today’s blog post from the Law Office of Bryan Fagan is designed to help you bridge the gap between your married life and your post-divorce life. There may also be tax implications when it comes to the decisions that you make negotiating your divorce regarding child custody, child support, and division of your community estate. On the one hand, divorce can impact your life from a tax perspective in multiple ways. This means that the circumstances of your case just got a little more complicated. On the other hand, resources like this blog post and especially advice from an experienced tax professional can help you to learn a great deal about your circumstances and help you to make good decisions for yourself and your family.
What impact will the date that you file for divorce have on your case?
When it comes to your tax obligations and responsibilities, your marital status determines how you must file. A question that you may have next April is whether you were considered married or single for the 2022 tax year. You may have filed for divorce in February 2022 and are now rounding the bend towards a conclusion to that case here in the summertime. A reasonable question to ask would be whether 2022 is a "single" tax filing year or a "married" tax filing year based on your having been married for more than half of the calendar year.
Under IRS rules, if you got divorced before December 31st of any year then you file your taxes for that year as an individual rather than as a married person. In the above example where we assume that you filed for divorce in February and eventually finalized the divorce in the summer of 2022, this means that you would file your 2022 taxes as an individual. It does not matter if you spent most of this year married. However, if your divorce takes a turn and you see the case stretch out into 2023 then you would need to file your 2022 taxes as a married person.
The next question that we should be asking is how do you know when you are divorced? In having worked with clients in divorce cases for a considerable amount of time I have come to find out that different people consider themselves “divorced” at various points in the timeline of a case. While you may “feel” divorced at one stage or another the IRS only considers you to be divorced once the Final Decree of Divorce is signed by all parties and the judge. That Final Decree of Divorce will indicate a specific date that the State of Texas declares you to be no longer married to your spouse. Until then, you are married and cannot file your taxes as an individual.
Hypothetically, if your divorce was stretched out throughout 2022 but you finally managed to mediate and settle your case in December 2022 then you would need to sign divorce paperwork and get the Decree in front of a judge before the end of the year to file as an individual the following April for your taxes. Settling your case in December and then not getting your Final Decree of Divorce signed off on by the judge until January 2023 means that you will file for your 2022 as a married person rather than as a single person. This is true even though you may feel like the divorce ended in your December 2022 mediation session.
What about filing as a Single Head of Household?
There are four different ways to file your taxes as a person in the United States. These are known as tax designations. Married filing jointly, single head of household, single and married filing jointly. The significance of each filing designation is that the IRS will use your filing status to determine how much tax you owe, what the standard deduction is for you, and whether you qualify for certain tax credits. Different filing requirements are attached to your tax filing depending upon whether you are married, single, or filing head of household. Talk to an experienced tax professional about any questions you may encounter that are related to your filing status.
To file your taxes as a single head of household you must have a dependent who lived in your home for more than six months. For this blog post, we will assume that the dependent person is your child although other people like your parents may qualify as dependents in certain situations. Importantly, you must have the right to claim your child as a dependent to file as head of household on your taxes. Parties to divorce cases have gone back and forth on this subject for years and years as far as which parent may claim the kids on their taxes.
In most cases throughout the years, the custodial parent of your children would be able to claim the kids as dependents on their taxes. The custodial parent is the parent with whom the children live predominantly during the year and who also receives child support from the noncustodial parent. Bear in mind that to file as a head of household you must also file your taxes individually rather than married filing jointly.
The question that you may have is if there is any way for you to qualify for filing head of household for 2022 even if you do not get your divorce finalized until 2023. The answer is that under certain circumstances the IRS may be able to consider you as eligible for head of household filing status if you stopped living with your spouse before June 1 and/or if you were responsible for more than 50% of the costs associated with maintaining your home. This requires an in-depth look at your budget and the history of your family.
Which parent will become responsible for the day-to-day needs of the kids?
We have already discovered that it is possible only for one parent to claim your children as dependents on your taxes for 2022 or any other year for that matter. With that said, you and your spouse will determine this during your divorce. If your final decree of divorce does not designate who can claim children on taxes, then the IRS will. For the most part, the parent who is named as the custodial parent will also be given the right to claim the children as dependents on their taxes. This is not an insignificant right to gain in the divorce and maybe something that you wish to focus your time and energy on through negotiations. For large families, this can be an incredibly important decision to make.
You cannot deduct alimony or spousal maintenance on your taxes
The tax cuts and JOBS Act passed during the trump administration changed how alimony and spousal maintenance are treated regarding taxes. The change regarding how these benefits of the divorce are not tax-deductible any longer for the person who pays the spousal maintenance. By the same token, it does not count as taxable income for the person who is receiving the benefits.
By the same token, child support payments are not deductible expenses. This is even though it may feel like they should be given that for many parents they represent a large portion of your income is deducted automatically each month on top of that, so many expenses regarding your children are deductible including childcare. For that reason, I have had more than one parent assume that these expenses can be deducted. However, that is not the case, and you should not plan on being able to deduct child support if you are the parent who ends up having to pay.
For some of you reading this blog post, these past two paragraphs may feel like a kick to the stomach. Many non-custodial parents also end up having to pay child support and spousal maintenance or contractual alimony. As a result, you should be prepared to account for these costs and every duction in your income. Admittedly, this is not an easy situation to get past. Even once your account for these costs and the fact that they are not deductible you still may find yourself in a position where your budget is getting pushed to its limit with these additional costs.
What this should also tell you is that during your divorce you need to pay close attention to making sure that you have presented an accurate budget for yourself to the court. The last thing you want to do is put the court in a position where it believes that your income or ability to pay spousal maintenance is greater than it is. Another consideration is that when it comes to child support you should not necessarily agree to pay anything above the guideline levels of support unless you 100% understand that the costs are necessary for a special need for your child. For many children, the base amount of child support is sufficient.
When it comes to subjects related to deducting costs associated with your divorce like child support and alimony then you should reach out to an experienced family law attorney to guide you on matters related to those subjects for the divorce itself. However, when it comes to issues regarding the tax situation then you should consult with an experienced tax professional for those purposes. And the turning with the Law Office of Bryan Fagan is a skilled practitioner and a family law income advocate on your behalf regarding your divorce case. However, our office will not provide you with tax advice but will provide you with information about how taxes relate to divorce. Otherwise, seek out the perspective of an experienced tax professional so you can be guided regarding these important questions.
The costs of a divorce cannot be deducted from your taxes
Your divorce can end up being long and relatively expensive. This is not set in stone and there are many ways to reduce costs associated with your divorce I would point you towards working with an experienced family law attorney with the Law Office of Bryan Fagan as being one of the major ways that the cost of a divorce may be reduced. Our turn can help you navigate the process efficiently so that you don't make mistakes and that there is no need to go back to correct the mistakes that they've already made. You would be amazed at how frequently the people who talk about how expensive their divorce has created a situation where they helped to increase the cost of their divorce case. Working with one of our attorneys can minimize the likelihood of that happening in your life.
one of the questions that we receive somewhat frequently here at the Law Office of Bryan Fagan is whether your divorce-related expenses Can't be deducted during the new taxes period unfortunately, as we have seen with other fees and expenses associated with your divorce legal fees, I've never been something that you can deduct on your taxes. The tax cuts and JOBS Act reiterated that no expenses associated with your divorce could be written off on your taxes as deductions.
Receiving guidance about taxes and other subjects related to your divorce
Without a question, the idea of going through a divorce is unappealing for everyone reading this blog post. If you had the way you would not have encountered difficulties in your marriage and as a result would not have needed to have gone through a divorce in the first place. However, now that you are here you need to be able to manage your case as best as possible. Is there anything that you can do about your divorce to reduce costs so that tax burdens and other fees are more manageable once your case comes to an end?
We have already talked about one of the major ways for you to reduce the headaches associated with your divorce is to work with an experienced attorney. We recommend those with the Law Office of Bryan Fagan. One of the great benefits of working with our attorneys is that we have served people across Southeast Texas to find themselves and a similar situation as you. I can say this confidently even though I do not know your specific circumstances. That is how fortunate our office has been to be able to serve as many Texans as we have. Do not discount just how important it will be to your case to have an attorney who has walked alongside people who are facing similar circumstances as you.
Overall, there is not much you can do in terms of being able to lighten the tax burden associated with various points of your divorce. If you are going to be the custodial parent to your children, then you have certain burdens when it comes to taxes compared to that of your non-custodial parent. As a non-custodial parent, you may be in line to have to pay child support and Spousal maintenance but will not be able to write off either on your taxes. This can be a significant burden but outside of not being named the non-custodial parent, there isn't much you can do to avoid the tax implications associated with this.
Otherwise, probably the most efficient way for you to manage costs, fees, and other expenses associated with your divorce would be 2 produce the length of the divorce case itself. So much of a divorce cost please wrapped up in the need to litigate through various issues associated with your case. If you can reduce the length of your case, then you can save money and oftentimes arrive at solutions that are better suited for you and your family.
Questions about the material contained in today's blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today's blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are helpful in that they can teach you about Texas family law and also help you to understand how these areas of the law may impact your family during the filing of a divorce or child custody case.