Tax Consequences Of Divorce

The Very Real Tax Consequences Of Divorce


Divorce creates two households where there had previously been one. As a result, there are certain tax consequences that must be taken into consideration in regard to property division, child custody and support, and alimony. Understanding how your taxes and declared income will be affected can help you avoid unpleasant surprises from the IRS. Additionally, you can increase the effective value of property to be divided between you and your ex-spouse by minimizing tax liabilities triggered by divorce while maximizing assets. It can be very confusing for the un-initiated. By working with an experienced professional you will get the guidance and answers you need to make decisions that are beneficial to you now and in the future. I am family law attorney Annette Baker, principal and founder of Baker Law. For over a decade I have helped people who are going through divorce understand the best way to divide assets.

How Alimony Can Affect Your Taxes

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. Beware of this: 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.

Child Support And The Division Of Child Tax Credits

Divorcing spouses need to understand that even such considerations as child support have important tax consequences for both custodial and noncustodial parents. 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. Having assisted in editing the Third Edition of the Family Law and Practice Volumes of the Massachusetts Practice Series, by Charles Kindregan and Monroe Inker, I have a deep understanding of how this works. 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 appears to be substantial concessions in property division negotiations, only to realize a positive tax treatment of your retained assets.

Speak With Me About Your Taxes And Property Division

Planning for the tax consequences of divorce is highly sensitive to the facts of your particular case.  Many factors must be taken into account including 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. I offer sophisticated tax planning and guidance in terms and examples you can understand. Call 978-922-2888 to set up and appointment. You may also email me at the office and I will respond promptly.