If you are in a marriage relationship that has run its course you probably are motivated to get things over and done with as quickly as possible. The desire to escape the emotional pressure is surely high. But to address all the factors of a Texas divorce, you need to view things through a wide-angle lens.
If you are a spouse who gave up a career to be a stay-at-home parent, you will likely face hurdles as you try to reenter the workforce. It can take time to get yourself back up to speed in terms of training and fleshing out your resume. If you are nearing retirement age, it is worth asking what type of spousal support or alimony you will need to maintain as much of your current standard of living as possible. Then there are taxes.
The tax implications of divorce probably aren’t top of mind for you as you step into divorce, but it is certainly something that can’t be overlooked. The touch points can be numerous.
For example, if you receive child support as part of your divorce settlement, the payaments aren’t considered taxable income. At the same time, they’re not deductible for the parent paying.
Direct support payments made to an ex-spouse as called for by the divorce or separation orders can be deducted. But any support provided outside of the decree is not deductible. And any form filed to claim the deduction must include your ex-spouse’s Social Security Number. Alternatively, you can supply the person’s Individual Tax ID Number.
If you are on the receiving end of alimony or support, the money is taxable. There’s no withholding on spousal support, so you might plan to meet the obligation by paying estimated taxes throughout the year. If you’re working, you could increase your wage withholdings.
Funds directed to retirement accounts may or not be deductible, depending on the timing of your settlement. And federal law regarding required health care insurance coverage is so new that navigating those requirements can present special challenges. To meet them, consult with a skilled attorney.
Source: IRS.gov, “Tax Effects of Divorce or Separation,” August 24, 2016