Tax Consequences of Divorce
Going through a divorce can be one of life’s most challenging events, especially when it comes to financial matters. The division of assets, the allocation of liabilities, and the arrangements that must be made with regard to child custody and support each can affect the spouses’ respective fiscal situations for years to come. There are practical matters such as whether the marital residence will need to be sold and who will pay off the loans on the family cars. Moreover, there are several potential tax consequences of divorce that, if not taken into consideration at the appropriate time and handled responsibly, can have far-ranging ramifications for one or both members of the former couple. Miami divorce lawyer Sandy T. Fox is a Florida Bar Board Certified specialist in marital and family law, so you can rest assured that he can handle your case with care and attention to every detail, including the possible tax consequences.Tax Consequences of Divorce
For some couples going through the dissolution of their marriage, the immediate tax-related concern is whether the couple will file their federal income tax return jointly or separately in the current tax year. Another important issue (which can recur annually until their children grow up) is which spouse will claim the kids as dependents. Depending on the former partners’ income levels, claiming one, some, or all of their children as dependents can affect the amount of taxes owed or the amount of a refund that may be expected. It is important to note that rules concerning issues like the child tax credit, the earned income credit, and even the taxation and deductibility of alimony can change over time. This makes it important to work with an attorney who can help you negotiate an agreement (or pursue a judgment, if a settlement cannot be reached) that will be fair both in the short term and in the years to come.Other Tax Issues During Marital Dissolution
Tax issues can also arise with regard to property distribution. When it comes to the distribution of property during a divorce, Florida follows the “equitable distribution” rule. (In other words, Florida is not a community property state.) Depending on the situation, property subject to division may include the marital home, other real estate, vehicles, household furnishings, stocks and bonds, pensions, 401(k)s, 403(b)s, thrift savings plans, individual retirement accounts, life insurance annuities, and brokerage funds. When dividing certain assets, such as a 401(k), a special document called a qualified domestic relations order (QDRO) may be required in order to minimize negative consequences or avoid a penalty. A person going through a divorce should get advice on issues such as whether it is more advantageous to roll over a certain account or take a cash payout. Each situation is different and should be discussed with an attorney who regularly practices in this area of the law.
An experienced divorce lawyer can counsel spouses on such issues as how the sale or transfer of marital property, such as a personal residence, can affect common tax deductions like mortgage interest or property tax. They also can lay out a strategic course of action for dealing with a jointly owned family business. (For instance, buyout payments “incident to a divorce” may be considered tax-free under some circumstances, but only if certain procedures and timelines are carefully followed.)Schedule a Consultation to Discuss Tax Issues Related to a Miami Divorce
The process of going through a divorce can have many consequences, some intended but some perhaps unexpected. By trying to handle a divorce on your own, especially if it is a high-asset case, you run the risk of encountering obstacles that an attorney could have avoided for you. The Law Offices of Sandy T. Fox, P.A., can help people in Miami, Aventura, Hollywood, and elsewhere in Miami-Dade and Broward Counties ensure that their future is protected as they face a divorce. Call us at 800-596-0579 or contact us online for an appointment.