Taxes affect many aspects of your life, from the sales tax you pay on goods when you go shopping to the taxes on your income or that of your business. You may not associate a divorce as having much to do with taxes, but in many cases, in addition to dealing with your divorce attorney, you may need to make time to visit a tax attorney before your divorce decree is finalized.
If you have to pay alimony, the good news is that you can deduct those payments from your taxes, even if you do not otherwise itemize deductions. Your tax attorney can answer any questions on what payments to your former spouse can be considered alimony for tax purposes. You will have to use Form 1040 for you filing, but no other special procedures are necessary.
If you receive alimony, you will have to include it as income on your tax return. Depending on the amount, you may need to pay estimated taxes, since your former spouse will not be withholding taxes on those payments. If you fail to pay estimated taxes on these payments you could be subject to penalties in addition to the tax owed when you file the following year.
Child support is not eligible for a deduction, as it is presumed that you would have spent those amounts on your child or children no matter your custody arrangement.
There may be other tax implications during a divorce. If you have to sell your home and it appreciated while you owned it, there may be tax owed on that gain, depending on whether your purchase another home. If you have to liquidate assets, such as stock, real estate or business property to fund a portion of your property settlement, you should factor the tax cost of those transactions into your distribution of marital property.
The more complex and sophisticated your property division will be, the greater the likelihood you will need tax planning advice for that portion of your divorce agreement.
Are you ready to take the first step toward reaching your goals?
Contact us today to schedule a Initial Consultation with our Toledo, Ohio, attorneys.