Divorce and Taxes

 Posted on March 22, 2016 in Divorce

One of the most complicated parts of a divorce can be trying to understand all of the different tax consequences a given course of action could cause. You need a knowledgeable lawyer on your side to help you make informed decisions that could impact your finances and your tax bill for years to come.

Do You File Jointly or Separately?

If you are in the middle of a divorce, then you and your spouse need to decide the best way to file taxes. If you were still legally married through December 31 of the most recent tax year, filing a joint tax return may be most beneficial. However, you should discuss the issue with your lawyer or tax professional.

What About a Refund?

Tax refunds are technically marital property in most situations. This means that the two of you will need to come to an agreement on how to split the refund or deposit the refund in a trust account until the court has decided how the refund should be divided.

Unallocated Payments

Child support and spousal maintenance payments may have tax consequences for both spouses. In some cases it may provide a useful tax benefit for child support and spousal maintenance to be combined into a single unallocated support payment. This can benefit both the spouse paying support and the spouse receiving support. However, like everything related to taxes and divorce, this is a fact specific issue that should be discussed with your lawyer.

Transferring Assets and Taxes

In the case of most marital assets, the IRS does not consider the transfer of one asset from one spouse to another in a divorce to be a taxable event. However, especially in high net-worth divorces, some asset transfers can trigger taxable income or even tax penalties. You and your divorce lawyer will need to carefully consider the tax consequences of any potential property settlement before reaching an agreement.

Who Claims the Children?

Usually the parent with whom the children live with most of the time gets to claim the children as dependents on his or her taxes. However, there are mechanisms to rotate which parent gets the tax deduction. One parent could also voluntarily give up his or her right to claim the children as dependents on his or her taxes.

If you have questions regarding taxes and divorce, then you need to speak with a skilled DuPage County divorce lawyer. Make sure you understand the tax consequences of your divorce. Please call The Stogsdill Law Firm, P.C. today at 630-462-9500.

Source:

https://www.irs.gov/publications/p504/