There are various rules that apply to Texas family law regarding the tax consequences of a negotiated agreement that follows the dissolution of marriage. The federal tax impact on the parties must be considered when a divorce is being negotiated. The experienced divorce attorney will be familiar with the rules and principles that guide the negotiations on these types of issues. Where unusually complex income and asset issues are involved, the attorney may work with an accountant or tax specialist where appropriate.
Basic issues in divorce settlements include that child support is not income to the receiving parent and is not deductible to the paying parent. However, the same is not true about alimony and other possible types of support payments. These are income to the receiving spouse and deductible on the tax return of the paying spouse. Various settlement negotiations may center on these principles.
In addition, there are other import tax rules and concepts that one’s attorney will utilize where necessary in the negotiating process, or as a separate remedy for the client outside of the divorce. One such rule is the “innocent spouse tax relief,” which the IRS recognizes in some instances as a protective measure to give relief to an innocent spouse. This occurs when the other spouse has improperly created a tax liability without the other spouse’s knowledge.
The foregoing remedy will exist outside of the divorce itself. However, other principles of Texas and federal tax law may be incorporated into the actual divorce agreement. Due to the specialized nature of such remedies and negotiations, one should always engage in these kinds of issues only under the guidance of an experienced divorce attorney. Tax specialists are also a part of the mix when their participation is deemed to be necessary and appropriate to the client’s interests
Source: forbes.com, “Taxes And Family Law: A Cheat Sheet Of What You Need To Know“, Stephen Hicks, Sept. 8, 2017