When filing for a divorce, few people stop to consider that there may be tax consequences that can have a lasting impact after the divorce is final. The right time to determine the impact that taxes may have on a divorce is before a divorce is settled!
Here is a brief rundown of some potential tax implications to discuss with your CPA or tax professional when you are negotiating and agreeing to your final divorce settlement. At the Burgfechtel Law Offices, we will work with your CPA or tax professional to help minimize any negative tax implications.
Tax Deductions and Exemptions for Child Dependents. In a divorce settlement, parents typically can contractually agree which parent has the right to claim the child related deductions and exemptions. If the parents do not agree, the IRS has set rules that parents must learn and abide by.
Tax Filing Status Options For the Year of Your Divorce – How Do you File? This can get complicated depending on when the divorce becomes final and if your spouse and you can agree on the filing status option to use. It is wise to make sure that your tax advisor and your attorney are working together to your attorney can advocate for the best possible outcome for you.
Spousal Maintenance Support payments may no longer be deductible by the payer and may not need to be reported to the IRS as income by the receiving spouse after January, 2019. Even small changes to the tax code can have a substantial impact so it is important to consult with your tax professional about any proposed settlements or possible court orders.
Asset Division. Dividing assets, including retirement accounts, in a divorce can also create tax implications. Different assets may have differing tax implication upon sale. The sale of some may result in a long or short term capital gain, or may even need to be treated as ordinary income. Conversely, the sale of some assets may result in a taxable loss, which could actually be considered an asset that could be divided in the divorce. These are complex issues that will often require your attorney to discuss with your tax advisor.
There are many tax considerations that can impact your life in the future that require some extra thought before and during your divorce settlement negotiations. At the Burgfechtel Law Offices, we understand that tax implications can be significant in a final divorce settlement. We will work with your CPA or tax professional to help make sure that your interests are protected.