The end of a marriage brings countless changes. One aspect of life that may be impacted the most by a high asset divorce is one’s finances. Florida residents who are preparing to divorce, may benefit from reviewing how it will affect their future tax filings.
The first major difference when it comes to filing taxes post-divorce is one’s filing status. In general, when one files as a single person, his or her tax rate tends to increase. In order to select the most appropriate filing status, the IRS stipulates that one’s marital status on the last day of the previous year will be applicable to the next tax season. Former spouses may choose to discuss whether the more advantageous Head of Household status would apply to either party. In addition, if the couple have minor children, then they will need to determine which parent will benefit from the credits and tax advantages that are provided under the Internal Revenue Code.
If alimony or child support have been included in the final decree, then it may be beneficial to ensure that these payments are structured carefully in order to have as little impact on taxes as possible. Furthermore, the sale of a home can have a major impact on one’s taxes — especially when it comes to the capital gains taxes and real estate that is located in an affluent area. Time is of the essence in order to take advantage of certain tax exemptions if they are applicable.
Lastly, when retirement and 401(k) accounts are included in a settlement agreement, careful planning can help reduce any tax liabilities. There are certain procedures to follow when splitting these accounts to avoid immediate tax consequences or early-withdrawal penalties. In Florida and across the country, a high asset divorce comes with many financial headaches but careful planning can help alleviate some of the tax burdens. An experienced divorce lawyer can ensure that one’s financial well-being is protected throughout the process.
Source: fool.com, “5 Tax Moves to Make Now If You Just Got (or Are Getting) Divorced“, Dan Caplinger, Accessed on March 19, 2018