A man and a woman while married can either file their federal income tax returns as “married filing jointly” or “married filing separately.” For the year of the divorce, the IRS determines filing status as of December 31. So, if a couple is divorced on December 15, they must file a single for that entire year because they were divorced as of December 31.
Generally, transfers of property related to a divorce are not taxable. Division of retirement accounts into separate retirement accounts in a divorce are not taxable events. If a husband has an IRA in his name and his wife is awarded 40% of the IRA, then her share is rolled over into a new IRA in the wife’s name and neither owes income taxes because of that division of the IRA account. If the ex-wife withdraws funds from her new IRA, then she would owe taxes.
Payment of child support has no effect on income taxes. Child support paid is not deductible and child support received is not considered income. However, alimony (“spousal maintenance” in Texas) can be deductible to the person who pays the alimony and taxable income for the person who receives the alimony.
Income tax liability can sometimes be a family’s biggest debt and greatly effect a divorce. Each spouse in a divorce should consult an accountant for tax advice and completely inform his or her divorce attorney about any tax problems. Usually, spouses are both liable for any income taxes that are due and incurred during a marriage. However, in some situations, a husband or wife may qualify for “innocent spouse relief.”
A state divorce judge or order cannot change federal law on income taxes. However, the parties can agree to matters that effect income taxes, such as the dependency exemption for children.
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