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The tax implications of divorce

Divorcing couples in Texas usually expect the emotional consequences that accompany the decision to separate or divorce. However, these couples are often surprised by the financial and tax consequences that occur during and after a divorce.

When a couple divorces, there will be a change in the filing status of their tax returns. If a couple is still legally married on the last day of December, then the couple will still be considered married for filing purposes. If the divorce decree is entered before the last day of the year, then the couple will be considered single for filing purposes. If the parties are still legally married at the end of the tax year, it will be important for the couple to decide if they will file jointly or married filing separate returnws. Filing jointly usually results in a lower overall tax rate and makes it easier to use certain credits and deductions. However, filing jointly also means that each spouse will be responsible for the total amount of the tax due.

There will be other tax consequences once the divorce is finalized. If one of the spouses is changing their last name, it is important that they notify the Social Security office of their name change. Failure to do so may result in the tax return being rejected by the IRS. A spouse that receives spousal support will need to include that amount as part of their income. The paying spouse will be entitled to a deduction in the amount of spousal support paid.

Child custody payments are treated entirely differently than spousal support. They are neither included in the taxable income of the recipient nor deductible by the paying parent.

Source: Yuma News Now, "How Marriage And Divorce Can Impact Your Taxes", April 05, 2014

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Bruce Turner

In addition to his law degree, Bruce Turner has a master's degree in tax law and is Board Certified in Commercial Real Estate Law by the Texas Board of Legal Specialization.

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