How Divorce Can Affect Your Taxes
Filing for divorce can have many tax implications.
You need to make sure that your divorce attorney is working with a qualified CPA and/or tax attorney before the case is finalized.
The following are some of the important tax issues to keep in mind:
- How child support and spousal support payments are treated on your tax return. You will need to consult with a tax professional on what to include as income and when to take the appropriate deductions.
- What the real value of an asset is when taking tax basis into account. Just because two assets can have the same market value, that does not mean they have the same tax basis. Therefore, what may appear to be an equal property division may actually saddle one party with a larger tax bill in the future should that asset be sold.
- Who will be responsible for taxes prior to the date of the divorce petition?
- Who will be responsible for taxes after the filing of the petition but before the divorce is granted?
- Who will get any tax refund?
- Who will claim the dependency exemption for the children?
- How will any retirement plans be divided so that tax penalties are not incurred?
As you can see, these issues can become complex so make sure you arm yourself with the proper professionals. That way, there will be no surprises after the finalization of the divorce.
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