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Dealing with taxes during a divorce

On Behalf of | Jan 9, 2020 | Blog, Divorce |

When spouses get divorced, they could face tax consequences for the sale or division of some property. People going through a divorce should familiarize themselves with Florida as well as federal tax law. They may want to discuss the situation with a tax professional who has a background in divorce.

Ex-spouses will need to change their filing from married to single at some point, but when they can do it may be determined by their marital status on the last day of the year. If they have a home to sell, they might want to consider the timing. Taxes on the sale of a home can be less for married filers in some cases, so they may want to complete the sale before the divorce has been finalized. Ex-spouses should also be aware that they can no longer deduct alimony payments since the passage of the Tax Cuts and Jobs Act. The dependent exemption has been eliminated too.

Some types of retirement accounts may require a special document called a qualified domestic relations order. Dividing an IRA as part of a divorce is not considered a taxable event, so a QDRO is not necessary. However, people might want to look into whether they can avoid the 10% penalty for early withdrawal.

An attorney could help a client plan for both the financial and emotional side of divorce. Establishing financial stability after the divorce is important, and some people may struggle with negotiating a divorce settlement because they are angry or upset about the separation. There might also be cases in which the couple has to go to court. For example, if one parent is concerned that the child is unsafe with the other parent or if one person believes the other person is hiding assets, litigation might be necessary.

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