Tax Obligations to Consider in a Texas High Asset Divorce

 Posted on August 23, 2022 in High Asset Divorce

There are many complex financial issues that need to be addressed in a high-net-worth divorce. Unfortunately, one of those issues is taxes. When marital assets are divided in a divorce, the IRS considers this income. This is why it is critical to have a skilled high asset divorce attorney advocating for you and ensuring your financial future is protected.

Spousal Support

Prior to 2019, spousal support payments were fully deductible for the spouse who was making the payments and the receiving spouse was required to claim the payments as income on their tax returns. However, for anyone divorced after January 1, 2019, the law was changed so that the spouse making the payments must pay taxes on this money since it is no longer deductible. The receiving spouse no longer has to report the payments as income.

Dependent Exemption

Whenever there are children in the marriage, a decision must be made in the divorce agreement over which parent will be able to claim the child as a dependent on their tax return. There are several common options that the court may order. For example, the parents may alternate years, where one parent takes the claim on even years and the other parent takes the claim on odd years. If the couple has more than one child, the option may be to “divide” the children on their tax returns.

Other Financial Issues

The IRS does not usually tax asset transfers that take place between spouses, however, this often does not apply in high asset divorces because couples have often set up their marital estate assets in trusts, partnerships, and other estate planning options in order to protect those assets. These types of titled assets are taxable by the IRS and any transfers could end up with significant tax obligations if not handled by a seasoned complex divorce attorney.

Other considerations include the division of stock portfolios since tax burdens are based on when the shares were purchased and it is not uncommon for a portfolio to include shares of the same company purchases in different years. The dates of purchases usually have different taxable amounts and this difference can produce a significant tax burden on one spouse over the other when the stock shares are divided between the two.

Contact Our Office Today

If you are ending your high-net-worth marriage, make sure you have an Austin high asset attorney fighting to protect your financial rights and ensure you receive your fair share of the marital estate, as well as avoid an unfair tax burden. Call Powers and Kerr, PLLC today at 512-610-6199 to schedule a confidential consultation.

Source:

https://www.irs.gov/uac/about-form-1041