From Matrimony to Taximony
You have found your one true love… you pop the question, get married and think you will live happily ever after. Sadly, in some cases this is not the case. To quote Benjamin Franklin, “Everything appears to promise that it will last; but in this world, nothing is certain but death and taxes.” Your marriage may not last but the taxman is forever!
There are several tax considerations to make during and after a divorce. This can include and not be limited to the way child support payments are treated, how alimony is applied and the filing status of each party. Child support payments are not taxable to the custodial or non-custodial parent. HOWEVER, an alimony situation, is much different; the paying spouse can deduct the support paid while the spouse receiving the support but claim payments as income. This can cause a tax liability and there may need to be some adjustment to the filing status of the receiving party. The filing status will determine the tax rate each spouse will pay. In many cases, divorced spouses would file as “individuals”; if there are children involved, there is a possibility to file as “head of household”. In many cases this tax rate is similar to the “married filing jointly” rate. In some cases, there are agreements that are made regarding claiming the children and how to best leverage the tax benefit of claiming children.
The sale of the family home can trigger tax implications as well. The sale of the home as outlined in the divorce can trigger tax issues or a taxable gain for one or both of the parties.
So, besides figuring out how to best leverage your position in a divorce, you now need to figure out how to not have the government share in your divorce proceeding…. Taximony!