Navigating through a divorce can be a complex and emotionally taxing journey, and one of the key areas often overlooked during this process is the tax implications of divorce. Understanding how divorce can affect your taxes is crucial in planning for a financially stable future. The recent changes in tax laws, particularly those that came into effect in 2018, have significantly altered the landscape of spousal maintenance and its tax treatment.
In this comprehensive guide, we actively examine how divorce can directly affect your tax status, deductions, and liabilities. Moreover, we delve into various aspects, including changes in how spousal maintenance gets taxed, considerations regarding filing status, and tax deductions related to children. Our primary objective is to furnish you with a clear comprehension of the tax implications of divorce, thereby enabling you to proactively navigate these alterations with confidence.
Changes in Tax Laws Affecting Spousal Maintenance
The 2018 tax law revisions have indeed ushered in noteworthy alterations in how spousal maintenance payments undergo treatment. Commencing from 2019, the payor loses the ability to deduct spousal maintenance payments from their taxable income. Conversely, the recipient is no longer obligated to report these payments as taxable income. This shift marks a substantial departure from the previous norm, significantly impacting the financial landscape of post-divorce obligations.
The previous tax laws allowed the payor of spousal maintenance to deduct these payments from their taxable income. This was often a significant financial relief, especially for high earners. Conversely, the recipient, usually earning less, would be taxed at a lower rate on these payments, resulting in overall tax savings for both parties. The new law, however, shifts the tax burden and potentially affects the financial strategies of both parties in a divorce.
Upcoming Tax Consequences in 2019
As 2018 winds down, it’s crucial to consider the tax implications of divorce. This includes considerations around spousal maintenance, child support, child-related tax deductions, and your tax filing status. Each of these factors can significantly influence your tax liabilities and returns.
Filing taxes in 2019 will be particularly impacted by your marital status. Your filing status determines your tax deductions, eligibility for tax credits, and other filing requirements. The IRS considers you married for tax purposes if you are still legally married as of December 31st of the tax year. However, filing jointly means you’re responsible for any issues with your spouse’s income, which could have significant implications.
Filing Status Considerations for Divorced Individuals
If divorced by December 31st, you must file as a single person. Qualifying as Single/Head of Household depends on whether you were divorced by this date, if your child lived with you for over half the year, and if you were responsible for the majority of your household expenses. Conversely, if your divorce extends into 2019, you must file as married, either jointly or separately. Filing as married/separate often results in higher tax rates, but it can be a strategic choice to avoid complications from your spouse’s financial issues.
The “innocent spouse” principle offers protection if you are unwittingly held responsible for your spouse’s misdeeds. This principle allows you to submit a statement to the IRS clarifying your lack of involvement in any problematic behavior of your spouse that led to tax return issues.
Child-Related Tax Deductions and Exemptions
Determining who claims the children on tax returns can significantly impact your financial situation post-divorce. The IRS permits parents to alternate claiming children on their returns. Often, the higher-earning spouse may benefit more from claiming the child, but this should be evaluated by a tax professional. You can agree in your divorce decree or independently to split the tax savings from claiming your children.
Child support payments received are not considered earned income and thus are not taxable. Similarly, the payer cannot deduct child support payments. This is in contrast to spousal maintenance, which, until 2019, was tax-deductible for the payer and taxable income for the recipient.
Property Taxes and Divorce Settlements
Receiving property or shares in a property as part of a divorce settlement does not incur taxes. However, if property is sold during the divorce, taxes on capital gains or ordinary income are due, depending on when the sale occurred. Converting a traditional IRA into a Roth IRA triggers taxes on pre-tax savings at your ordinary income rate. The use of a Qualified Domestic Relations Order (QDRO) to transfer retirement funds between spouses typically does not incur tax liabilities.
Seeking Legal and Tax Advice for Divorce
For comprehensive guidance on divorce and its tax implications, contacting the Law Office of Bryan Fagan, PLLC is advisable. Our team of experienced family law attorneys can offer free consultations, providing insights into the complex intersection of family law and tax regulations. We prioritize your interests and strive to achieve optimal outcomes for you and your family.
The Law Office of Bryan Fagan, PLLC is dedicated to providing clients with personalized legal services. We thank you for your interest in our law practice and invite you to join us for more insightful content on Texas family law. Our commitment is to guide you through the legal intricacies of divorce, ensuring you are well-informed and supported throughout the process.
Ebook
If you want to know more about what you can do, CLICK the button below to get your FREE E-book: “Child Protective Services E-Book.”
Other Articles you may be interested in:
- What to Do When CPS Asks for a Drug Test in Texas
- CPS and how The Law Office of Bryan Fagan, PLLC, can help
- Take control of your child’s CPS case by following these tips
- How to stand up for yourself during a Texas CPS case
- How to prevent a second CPS investigation after your first concludes
- Family Law Cases in Texas: The final stages of a CPS case
- When can CPS remove your child from your home in Texas, and what can you do about it?
- What to do if you no longer like your CPS service plan?
- In what circumstances could your child end up living with your relative during a CPS case?
- What can a CPS investigation into your family mean now and in the future?
- What to do if CPS is investigating your spouse in Texas for abuse or neglect of your child?
- Can CPS photograph your house and request your child’s medical records in Texas?
Law Office of Bryan Fagan, PLLC | Houston, Texas CPS Defense Lawyers
The Law Office of Bryan Fagan, PLLC, routinely handles matters that affect children and families. If you have questions regarding CPS, it’s essential to speak with one of our Houston, TX CPS defense Lawyers right away to protect your rights.
Our CPS defense lawyers in Houston, TX, are skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact the Law Office of Bryan Fagan, PLLC by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan, PLLC handles CPS defense cases in Houston, Texas, Cypress, Klein, Humble, Kingwood, Tomball, The Woodlands, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County, and Waller County.
Categories
- Child Protective Services
- child protective services attorney
- child protective services blog
- Child Protective Services Investigation
- CPS
- cps appeal
- cps attorney
- CPS case
- CPS court
- CPS custody
- CPS Defense
- CPS intervention
- CPS Investigation
- CPS investigations
- CPS investigator
Bryan Fagan, a native of Atascocita, Texas, is a dedicated family law attorney inspired by John Grisham’s “The Pelican Brief.” He is the first lawyer in his family, which includes two adopted brothers. Bryan’s commitment to family is personal and professional; he cared for his grandmother with Alzheimer’s while completing his degree and attended the South Texas College of Law at night.
Married with three children, Bryan’s personal experiences enrich his understanding of family dynamics, which is central to his legal practice. He specializes in family law, offering innovative and efficient legal services. A certified member of the College of the State Bar of Texas, Bryan is part of an elite group of legal professionals committed to ongoing education and high-level expertise.
His legal practice covers divorce, custody disputes, property disputes, adoption, paternity, and mediation. Bryan is also experienced in drafting marital property agreements. He leads a team dedicated to complex family law cases and protecting families from false CPS allegations.
Based in Houston, Bryan is active in the Houston Family Law Sector of the Houston Bar Association and various family law groups in Texas. His deep understanding of family values and his professional dedication make him a compassionate advocate for families navigating Texas family law.
