Divorce leaves an emotional and financial impact. Besides property division and deciding on custody, the couples face difficult tax matters. All decisions, including the alimony, transfer of properties, and retirement savings, affect future taxation. The sooner you take care of these, the more you will be left with and the fewer chances of receiving a tax bill.
1. Important Areas That Influence Taxes During a Divorce
Some aspects of a divorce agreement have immediate tax implications. Knowing them up front, you can plan better and avoid stress down the line.
The following are the most frequent tax areas to consider:
- Alimony payments - In most cases, the payer is not permitted to deduct alimony payments, and the recipient does not pay taxes.
- Division of property - Property transferred between the spouses is not taxed during the transfer; however, the subsequent gains can raise tax liabilities.
- Retirement funds - Splitting finances without a court order can have serious consequences and taxation fines.
- Child credits - Each year, only one parent is permitted to claim the child tax credit.
The help of a legal and financial professional, such as David Mejias, can help create agreements that reduce tax liability and protect your wealth.
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