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High-Asset Divorce and Taxes

 Posted on February 27, 2015 in High Asset Divorce

high-asset divorce and taxes, Cedar Park high-asset divorce attorneyIt is that time of the year again—tax season. Filing income taxes can be stressful and difficult, but if you have recently gone through or plan on going through a high-asset divorce, those difficulties can be amplified by your divorce settlement type.

Exemptions for Dependents

In regards to income taxes, the dependency exemption and child tax credit are very important. If you and your ex-spouse have children together, this is something that you should have stipulated in your final divorce decree. Contrary to what many people may think, the parent who has physical custody of the child is not the one who necessarily gets the dependency exemption. If the non-custodial parent receives the exemption, then the IRS requires a release, signed by the custodial parent, to be attached to his or her income tax return. Failure to do so could cause the IRS to disallow the exemption.

Although a custodial parent may not be able to take the exemption, there are still benefits that he or she can apply to his or her own tax return. These include filing as head of household and qualifying for the childcare credit and exclusion for child care benefits.

Spousal Support

Whether you are the obligor or the obligee, spousal support must be reported to the IRS. If you are the person receiving the support—the obligee—then you are required to declare any spousal support you receive as income. Hence, you will be taxed on it. If you are the person who is paying the spousal support, then you are entitled to take those payments as a deduction. Moreover, the amounts on each party's income tax return must match. If the amounts do not match, one or both of the returns may raise a red flag with the IRS, and this could initiate an audit.

Child Support

Unlike spousal support, a parent receiving child support is not required to declare the support on his or her tax return, and the parent paying the child support is not allowed to declare those funds as a deduction.

A Texas Divorce Attorney Can Help

There are several factors to consider when negotiating a high-asset divorce settlement. Income tax is one of those areas. Thus, it is critical to contact an aggressive Cedar Park high-asset divorce attorney if you anticipate complex litigation to end your marriage.

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