Divorce can be a hectic time, with a lengthy list of to-do items that never seems to shrink. It is easy to overlook things during a military divorce, and it is rare that a Texas spouse emerges from the process confident that he or she has fully covered all of the bases. Tax issues are an example of a topic that can be greatly influenced by a divorce, but which many spouses fail to consider during the divorce process.
Once a divorce is made final, the tax obligations of both parties will shift. The most obvious change is in tax status. While married, most spouses choose to file as “married.” Once a divorce has taken place, that status will change to “single”. For individuals who will assume the primary care of one or more children, it may be possible to file as “head of household,”which has a number of tax advantages.
Another impact that divorce will have on taxation involves the ability of a parent to claim a child on his or her tax return. Many people assume that the parent who takes on primary physical custody will automatically receive the right to any and all tax advantages, but this is not the case. The ability to access tax credits and claim children as dependents can be negotiated during the process of divorce.
Some credits, such as the Child and Dependent Care Credit, can only be claimed by the party who has primary physical custody. Other benefits, such as the Child Tax Credit and credits for education expenses, can be claimed by either parent. In some cases these advantages can add up to significant tax savings. Even more importantly, the impact of these benefits will often be more helpful to one parent than the other, which should prompt both parties to consider taxation when moving through the negotiation portion of a Texas military divorce.
Source: fool.com, “Here’s How Your Taxes Changed If You Just Got Divorced“, Dan Caplinger, Feb. 11, 2016