The Tax Implications of Divorce
When going through a divorce, there is an abundance of choices and considerations that must be made during the process. This is coupled with the reality that emotions are often running high and making objective choices is not always the easiest. Of the considerations that are made during a divorce, one of the most important is to understand the tax implications of any property or asset you receive as part of the divorce settlement. Your family law attorney will be able to help you along this process and ensure that you are making informed decisions that will place you in a solid financial position as you move on from the divorce.
Common Decisions Made
Divorce rates are high across the country, and the state of Florida was recently found to have the third highest divorce rate in the nation. With this influx in divorce, individuals are becoming more knowledgeable of the process and willing to make decisions for themselves. However, it is important to recognize that this is almost never in your best interest. As an active member in the divorce process, emotions can easily cloud your judgment and present a situation where you are not acting in the best interest of your future. During the divorce, some of the common tax considerations that will be made during negotiations include the following:
- In certain cases when dividing retirement funds, you may be subject to transfer taxes;
- If you receive payments from your spouse, this may be considered taxable income, depending on your situation. This holds especially true for individuals who receive alimony payments;
- In situations where you are dividing assets amongst each other, it is important to be cognizant of assets that will carry a capital gains tax in the future. Failure to recognize this could significantly devalue the real monetary value of the asset as it pertains to asset division during the divorce.
It is also important to recognize the tax classification changes you may undergo following your divorce. Filing your taxes as a single person with less property can often dramatically change the amount of tax breaks you are eligible to receive. Further, depending on how you divide your property, you may also lose interest on your mortgage following your divorce. Many people are not fully aware of how different they will be taxed following a divorce. Speaking with a knowledgeable financial planner and accountant prior to finalizing your divorce agreement is often a wise decision.
Do You Need Help?
The divorce process can be an extremely complex and overwhelming time. Struggling to make informed decisions about your future and your financial security can lead to large amounts of stress. Fortunately, a knowledgeable divorce attorney will be able to review the specifics of your case and make objective decisions that will best serve your financial future. Contact the Fort Lauderdale office of attorney Sandra Bonfiglio today for a free consultation. Attorney Bonfiglio will be able to answer any questions you may have and help relieve the stress of the strenuous divorce process.