College Station Divorce Lawyer Discusses the Tax Consequences of Divorce
For many divorcing couples, sizable and complex financial transactions are necessary in order to effectuate the dissolution of the marriage. For instance, your College Station divorce lawyer may help you negotiate an agreement wherein you get to keep the marital home but you must buy out your spouse of his share. Likewise, you may have questions as to whether your alimony or child support is considered taxable income.
There are a number of tax considerations associated with a divorce, and your lawyer is one of the best resources, along with your accountant, to help you sort out your likely post-divorce federal or state tax liability.
Common Tax Concerns during a Divorce For starters, child support is not considered taxable income and will not increase your overall federal or state tax liability. On the other hand, paying child support is not a deductible expense for the payor spouse. Attempts to deduct child support by renaming it as a childcare expense will result in a denial by the IRS, and possible penalties.
Alimony payments are tax deductible for the spouse required to pay. However, if you try to settle all or part of your alimony requirement by transferring large amounts of property or assets to your spouse at the outset of your divorce, the IRS could consider the transaction a property settlement, which is not deductible.
Dividing and settling the real estate acquired during the marriage can be the most complex tax issue for divorcing couples. One spouse may be thrilled to receive the entire marital home as part of the divorce decree, but subsequently devastated at the transfer taxes associated with the transaction.
Speak to a College Station Divorce Lawyer before Engaging in Divorce-Related Financial Transactions If you and your spouse have a harmonious relationship and believe you can navigate through the divorce process unassisted, understand you may be faced with unexpected tax consequences once the process has concluded. To avoid this pitfall, speak to a College Station divorce lawyer right away. Contact the Peterson Law Group today by calling 979-703-7014.