Tax season is not everyone’s favorite time of year. And if you recently went through a divorce in San Antonio, things will change a bit from what you are used to. Married couples can experience some significant tax breaks, such as receiving credits for income, education, adoption, child care, and more. Marriage almost gets treated as a perk during tax season. So how are your taxes affected after a divorce?
Your filing status will change
As long as you are officially divorced by the end of the year, you will need to file separately for the upcoming tax season. For example, if your divorce is finalized by December 31, 2022, then you are officially seen as single for that entire 2022 year and will be required to file separately for the upcoming tax season in 2023, which will put an end to all of those tax breaks you were receiving. However, if you have separated but are not yet officially divorced, you are still considered legally married because Texas does not recognize “legal” separation. As such, you do still have the option to file jointly or separately.
Difference between filing jointly and as individuals in San Antonio
You typically will earn more tax credits when you file jointly, but if your divorce has been finalized, then the options have changed. If you filed jointly in years past, then you probably received perks like:
- Lower tax brackets. If a married couple files separately, they could be paying a lot in taxes. However, if they file jointly and one spouse makes less money than the other, the lower one can help pull the higher one into a lower different tax bracket which can decrease their overall taxes.
- Greater charity deductions. The amount of charitable donations that can be deducted per year is typically 50% of your adjusted gross income per individual. However, filing jointly can raise that. You can see the full scope of your allowed deductions on the IRS website, but you should speak with your San Antonio divorce lawyer as well as an accountant about the specifics which apply to you.
- Raised gift tax limit. Individuals are only able to gift their child, or anyone else for that matter, a total of $15,000 per year before being taxed on it. As a married couple who files jointly, that limit is doubled.
- Higher standard deductions. The non-taxable income limit is $25,900 for joint filers in 2022, compared to individual filers at $12,950.
- IRA contributions. If an individual is not earning any income, they typically cannot contribute to an individual retirement account. However, they may be able to contribute once married based on their spouse’s income. Then, each spouse can make tax deductible contributions of up to $6,000 each.
- Property tax deductions. Married couples can deduct as much as $10,000 in property taxes if filing jointly compared to $5,000 if filing separately.
- Child tax credits. If you have children, your family could receive $2,000 per qualifying dependent. If filing separately after divorce, only the custodial parent would be able to claim this tax credit.
Filing as “head of household” could cut you a break
If your divorce has been finalized and you also have primary custody of at least one child that qualifies as a dependent, you have the option of filing as the “head of household” instead of as an individual. This will give you a few more tax breaks like:
- Falling into lower tax brackets despite having more taxable income
- Qualifying for higher standard deductions
Standard deductions are the portion of income that cannot be taxed which will essentially reduce the amount you owe in taxes. The amount does get adjusted each year for inflation and also factors in your age and some other criteria. However, compared to the average $12,950 standard deductions that single filers are entitled to, those who file as head of household are entitled to an average of $19,400.
Is child support tax deductible in Texas?
After divorce, the custodial parent may want you to pay child support to help with the cost of raising your children. Depending on your income, this can become a pretty hefty monthly bill. Unfortunately, Texas does not consider child support deductible in your tax filing, either. It does not matter how much or little you pay; the IRS considers child support to be a personal expense. Because child support goes towards clothing, food, entertainment, and things like that, these would all not be considered deductible expenses otherwise, like if you were to purchase them directly yourself. The same rule goes for if you are the one receiving child support as well.
Paying spousal maintenance can be a tax deduction
- Relied on you for financial support
- Has insufficient property to provide for their needs
- Is unable to support themselves through work
- Cannot work due to childcare needs as the custodial parent
In order for alimony to be tax deductible, it needs to be official payments ordered by the court. At the same time, the recipient is required to pay taxes on the payments they receive.
Going through a divorce is never easy, but our San Antonio team of divorce attorneys at Grable Grimshaw PLLC can help make the process as easy as possible. We can help determine the best course of action and give some insights on how your financial situation may change after divorce, but it is always best to contact a reliable tax expert when you have specific questions about deductions, credits, and more. Call our office or submit our contact form today to schedule a consultation with a member of our San Antonio legal team.