When you are going through a divorce, seemingly minor financial decisions regarding property division and support can result in tax implications – both now and in the future. It is important to consult your attorney regarding taking steps now to prevent tax penalties and future financial complications.
While there are many tax-related matters to consider during a divorce, the following five tips from Forbes.com can get you started:
- Property settlements: Property transferred during a divorce is typically tax-free. If you have high-value assets, however, they may be subject to gift or income tax. There also may be future tax implications to consider.
- Property transfers: Property transfers that take place within one year after the marriage ending are typically tax free. Transfers that occur after the first year are not automatically taxed, but are subject to IRS scrutiny.
- Business division: If one spouse chooses to buy the other out of a shared business, it could be considered a taxable sale in certain circumstances.
- Retirement accounts: Generally, IRAs and other retirement accounts may not be taxed until they start paying out, but should be considered during property division.
- Alimony – Alimony, or spousal support, is generally tax-deductible for the paying spouse and is usually considered taxable income for the receiving spouse.
While the above information is generally the case, every situation is different. We cannot stress enough the importance of contacting an attorney to discuss your specific financial and tax-related questions. At DeShon Laraye Pullen PLC, we are dedicated to helping you and your family thrive. We welcome your financial questions and concerns related to your family law matter.