Houston Tax Related Issues in Divorce Lawyers
The mental and emotional demands of a divorce can be overwhelming. Not only do you struggle with your own intense emotions, but you also work hard to provide support and stability for your children and loved ones at the same time. All of these demands don’t even take into account the added stress of worrying about how to split your property and file your taxes post-divorce. The relationship between divorce and taxes can be very complicated and difficult to understand, especially if you have no prior education or experience working with tax law.
Along with working through a number of issues, such as the division of property, establishing child custody and visitation, and child support payments, divorce also has a number of significant tax implications one should be aware of prior to pursuing a divorce. Unfortunately, the tax consequences of divorce are often overlooked by couples, which is a potentially serious mistake that could cost them thousands of dollars.
Let our tax issues divorce lawyers at Holmes, Diggs & Sadler help you navigate the tax implications of divorce. The following are some basic guidelines for some tax issues to consider. If you have questions about divorce and how it will impact you financially, contact the Houston tax issues divorce lawyers of Holmes, Diggs & Sadler today at (713) 802-1777.
Important Tax Issues You Should Be Aware Of
By speaking with an attorney, he or she can make sure you understand how the following variables can impact your taxes and finances after divorce:
- Filing status – Depending on whether you complete your divorce before Dec 31st of the previous year, you can claim your filing status as either single taxpayer, head of household, or married taxpayer (either married filing jointly or married filing separately). You will also need to determine whether you have individual or joint liability for any future tax penalties. The way you choose to define your status can determine the number of deductions or credits available to you and the amount of the standard tax deduction you qualify for, so it’s helpful to have the input of a tax issues divorce attorney.
- Alimony – The funds required for spousal support is considered taxable income for the spouse who receives it and is also considered a tax deduction for the spouse who pays it.
- Child support – Unlike spousal support (alimony), child support payments are not considered taxable income for the payee and are not considered a deduction for the payer.
- Tax deduction – Only the spouse who has primary custody of the children will receive the tax deduction for dependents.
- Property division – Before the divorce, both spouses will need to participate in a property settlement agreement, which is an arrangement that determines which spouse gets what property after the divorce. This settlement will determine who owns the estate and other taxable items, and, therefore, who will pay taxes for them.
- Attorney fees – Generally, attorney fees related to the divorce are not tax-deductible. Some exceptions include fees for tax advice, help in determining alimony, and fees determining estate tax consequences.
Because of the inherently complex nature of tax law and divorce, having a competent and knowledgeable tax issues divorce attorney as your legal counsel will be invaluable.
How Do We Decide How to Divide Our Property?
A property settlement agreement determines which spouse gets what property after the divorce. This process generally requires the assistance of a financial expert because the value of some assets (like homes) may be complicated to divide. Many couples choose to sell their home before the divorce and then split the income from the sale of the house. However, if you do become the sole possessor of the home, you might have an obligation to pay your spouse part of the income from the sale of the house a few years down the road.
If you keep the home after your divorce, you will be responsible for paying property taxes, but you will also qualify for home mortgage interest deductions.
What Is the Capital Gains Tax?
Keep in mind that the sale of your house might qualify you for the capital gains tax. This tax is a levy on any funds earned from the sale of property that was sold at a price higher than the price at which it was bought. This tax might be 0%, 15%, or 20% of the income from your home, depending on your tax bracket.
There are some ways to lower the capital gains tax—for example, the principal residency rule declares that if the home in question has been your main home for at least two of the years in the last five years before the sale, you can be excluded, for up to $250,000, from the capital gains tax. If you declare your status as married on your taxes in the year of the sale and file a joint tax return, you could be excluded for up to $500,000 (which is $250,000 for each spouse).
If you choose not to sell right away and one spouse continues living in the home after the divorce, you might not qualify for these capital gains tax exclusions.
What If My Spouse Tries to Sell My Property Before a Fair Settlement?
If your spouse tries to sell property, change the deed to a house or car, or otherwise fraudulently avoid dividing an asset before the divorce is finalized, Holmes, Diggs & Sadler can help you protect your property rights and try to help you get your money back.
The tax issues divorce attorneys at Holmes, Diggs & Sadler uphold a tradition of excellence, evidenced by an award-winning legacy and decades of experience working with divorce law. Our lawyers have an outstanding track record of successful cases and highly satisfied client reviews.
They can empathize with the traumatic nature of your situation and respond sensitively and competently, leaving you with fewer heavy matters to worry about. Don’t let yourself be financially taken advantage of or caught unaware by the deadlines, payments, and rules that can sometimes be hard to know about in the divorce law system.
You need to speak with a professional about the tax implications of your divorce to ensure you don’t end up in legal trouble. For more information about how your taxes are affected by divorce, contact a Houston divorce attorney of Holmes, Diggs & Sadler at (713) 802-1777 today.