Divorce Tax Planning Law Service
Smart decisions today can lead to a better financial future
When a married couple decides to divorce, they often do not realize the tax implications of the decisions they will be making. Even when both parties are concerned about the financial aspects of divorce, tax issues are often overlooked.
At E&L, LLP, we advise clients in divorce tax planning, and work with financial advisers and tax experts to provide clients the knowledge they need to make informed decisions.
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Tax issues in divorce
When financial matters such as dividing assets and income arise, it is wise to plan accordingly with each party’s tax liability in mind. Careful planning can result in a better divorce settlement for both parties.
Spousal support and alimony payments are tax deductible for the payor and taxable income for the payee when there is an order by the court. Because the party making the alimony payments is often in a higher tax bracket than the party receiving the payments, this arrangement can be beneficial to both.
It generally is a beneficial arrangement to give the spouse in the lower tax bracket more taxable assets from the marital estate. Each couple’s financial and tax circumstances are unique, so the client will want to discuss their finances with an experienced lawyer. At E&L, LLP, we advise our clients on the best way to handle the division of retirement plans, IRAs, pension plans, mortgages, businesses, stocks and other assets.
Tax planning following a divorce
Planning how you are going to file taxes and what you will be claiming post-divorce is a major part of a comprehensive divorce process. An experienced divorce tax attorney will know what questions to ask and how to properly craft an agreement so things like alimony payments are tax deductible. Additionally, the sale of assets as part of the divorce proceedings can also have tax implications that need to be considered, both good and bad.
There are many tactics an experienced divorce attorney can employ to protect their clients’ interests and maximize their assets. For instance, spousal support payments are considered taxable income in most instances, but a properly crafted divorce decree can exclude them from being taxable income. Many individuals also don’t realize that non-custodial parents can claim children as tax exemptions if it’s been negotiated into the divorce contract. Claiming the kids can alternate depending on the year, for instance.
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