If you are about to go through a divorce, taxes are probably the last thing on your mind.

Stressed young woman checking bills, taxes, bank account balance and calculating expenses in the living room at home

But it is something that you need to address.Divorce can be financially devastating enough without paying unnecessary taxes.

Transferring Assets as a result of the settlement
Transferring assets between spouses during a divorce often carries no tax consequences for either party. However, depending on the basis that is invested in certain assets, there could be hidden tax consequences associated with selling that asset. Some assets that may have hidden tax consequences include investment holdings, real estate, and business interests. The tax consequences associated with these assets may end up reducing the value of the assets that appear to be worth more.

Who gets the tax deduction for the children?
The IRS states that a parent who is primarily in charge of parenting a child has the right to claim that child as a dependent on his or her tax return. There is one exception to this rule, however, which is when the child’s custodial parent allocates dependency of the child to the non-custodial parent in a written document. The distribution of these exemptions and any corresponding value needs to be addressed in the divorce decree, and the value should be considered in the overall value of income between the spouses.Individuals are not able to file their taxes jointly for the year they get divorced. If the divorce occurs at the end of the year, it is important for both individuals to adjust their withholdings to account for the change in their filing status. If the divorce occurs earlier in the year, however, there may be no large impact on how the individuals file their taxes. The change in filing status should be considered part of the overall resolution of the divorce.

Are Alimony Payments Deductible

They used to be, but they aren’t anymore. Alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018.

Taking these considerations into account can help divorcing couples minimize the potential pitfalls they may face when filing their taxes. Additionally, both parties should discuss it with their divorce lawyers as well as their financial advisors regarding which tax implications may or may not apply to them.

Ty Zdravko practices law as a divorce attorney, and family law attorney in Palm Harbor, Clearwater and the surrounding area.

For more information, visit our website at www.divorceboardcertified.com
or call (727) 787-5919.