What effects do divorce, alimony, child custody, child support, and property division have on your income taxes? Do these effects matter enough to consider? Yes.
To be sure, when going through a divorce the tax implications usually take a backseat to questions of child custody, alimony, division of marital debt, who gets the house and other marital assets. Taxes on something people usually want to fight over or even think about in a divorce action.
But failure to anticipate and plan for the effects that divorce has on your tax status and tax liabilities can make taxes one of your worst divorce headaches.
You may have heard the term capital gains, but have you ever wondered how it affects you? How it can burn you in divorce if you don’t make adjustments for capital gains taxes in your property settlements?
Did you know that child support payments are not deductible to the payor from personal income taxes? Did you know that alimony payments are? Did you know that trying to disguise alimony as child support or child support as alimony are old tricks the IRS doesn’t appreciate and won’t hesitate to punish if discovered?
Consider what happens to the tax benefits of being a parent when your kids no longer live together with you and your spouse under the same roof. State and federal tax laws and regulations affect what tax benefit you can and cannot claim depending on what kind of child custody award is made in your divorce.
There are a few special rules, tips and tricks that apply to the division of retirement benefits in divorce that don’t apply at any other time, but if you don’t apply them properly, you can lose out. What if you and your spouse have unpaid taxes going back for years? Who will be responsible to pay them now? Get your tax planning wrong in your divorce now, and you may never get the opportunity to fix it later.
We’re not telling you this to scare you, were telling you this so that you can do something about it while you still have as much time in as many options as you’re ever going to have. Forewarned is forearmed. In addition to this blog post, please avail yourself of professional tax advice through an accountant, and review the other tax resources on our website to help you understand how divorce affects your taxes and how best to integrate your tax and divorce planning for the benefit of you and all of your family members.
Utah Family Law, LC | 801-466-9277