Divorce - Tax Aspects

Most attorneys can handle the legal aspects of the divorce, but few bother with the tax planning.

Considerations:

Filing Status - is dependent on the state you reside in along with your personal facts and situation. In most cases, until the "Decree of Final Separation" is received, both parties can file as married filing separately or filing jointly with the estranged spouse. If one provides a home for a dependent child, they may be able to file as head of household. There can be problems with each of these scenarios.

Alimony - is deductible by the payer and is included in the recipients income. There are nine hurdles that the payments must clear to be deductible. I can steer you through them. There are new developments on interstate payments, when the payer lives in once state and the recipient lives in another - do you know where the money is taxable? Payments made before the final decree can be treated as alimony if certain steps are followed- again, I can help.

Child Support - is not deductible by the payer nor is it included in the recipients income.

Transfer of Property incident to divorce will not result in a gain or loss. A transaction "incident to divorce" is: 1) made within one year of the date the marriage ended; or 2) made pursuant to an original or modified divorce or separation instrument and occurring within six years of the date the marriage ended. The property can be either property or cash, but cash payments may be recharacterized as alimony.