People in Maryland may have seen a recent article about the effects of divorce and how decisions that are made during the divorce settlement could have long-term consequences that impact their tax filings. These consequences may include additional and unexpected changes. With the help of an experienced family law attorney, people can keep this issue in mind and make it a part of their plan to come out of the divorce with the best financial outlook possible.
In a complex divorce there are many different assets to be considered in property division. Business holdings, real estate and retirement accounts, for example, all have different taxation consequences, so what may appear to be a good deal in the initial property division could also wind up having some long-term tax implications that make it less appealing.
For one thing, income tax for a single filer is most likely going to be greater than for a married couple filing jointly. All of that business and investment income that was once spread across two people will now likely be taxed at a greater level. Also, capital gains from liquidating property during the divorce will have to be apportioned between the divorcing spouses appropriately, so people need to make sure this is considered during the complex asset division negotiation and settlement.
Divorcing couples with children should also be aware of the tax consequences of their monthly alimony and child support orders. Payments for child support are not tax deductible, but alimony and support payments made to an ex-spouse are deductible.
Keeping these and other tax consequences in mind can wind up saving a person tremendous amounts of money throughout the years following a divorce. An experienced divorce attorney can provide more information on how to prepare for a settlement that provides favorable tax outcomes for a client.
Source: Reuters “What’s even worse than a divorce? For some, it’s the taxes,” Lauren Young, April 10, 2014