Tax Consequences of Divorce

Planning for the Tax Consequences of Divorce

Proper consideration of the tax implications and consequences of the decisions you need to make with respect to property division, child custody and support, and alimony can not only help you avoid unpleasant surprises from the IRS a few years from now, it can actually increase the effective value of the property to be distributed between the spouses by minimizing tax liabilities triggered by the divorce and maximizing assets. To learn how our experience with planning for the tax consequences of marriage dissolution can help protect your interests in a Massachusetts divorce, contact the Beverly office of Annette L. Baker & Associates.

Because alimony and property division are often considered together in negotiating a divorce settlement, it can be tempting to manipulate the characterization of a given property transfer as alimony to a lower-income spouse in order to reduce tax liabilities for both spouses, but the IRS will often look back three years after the effective date of the divorce in order to determine whether alimony or other support payments were not in fact property transfers with adverse tax consequences.

Divorcing spouses need to understand that even such considerations as child support have important tax consequences for both custodial and noncustodial parents, and the division of child tax credits and deductions between the spouses can be just as valuable and negotiable as the division of any other asset or liability. Your attorney's understanding of the use of tax attributes in property division and support questions can give you a significant advantage both in negotiations and in contested matters submitted to decision by the court. Under certain circumstances that are best described in detail in the context of your specific situation, it is possible to make what appear to be substantial concessions in property division negotiations, only to realize a positive tax treatment of your retained assets.

Planning for the tax consequences of divorce is highly sensitive to the facts of your particular case, and depends a great deal on such factors as each spouse's marginal rate, the appreciation in value of any given asset during the marriage, and the availability of deductions, exemptions, and credits relating to children, disabilities, certain business assets, and other considerations.

For sophisticated tax planning and guidance provided to you in plain English, contact a dependable North Shore divorce lawyer at the office of Annette L. Baker & Associates in Beverly's Cummings Center.