Tax Implications of Divorce
Tax season is a dreaded time of year for many Americans. This year, the subject of taxes has stolen headlines for months due to the recent overhaul of the tax laws. For divorced couples – or those in the process of divorcing – filing taxes can be complicated. It is important for couples to consider the tax implications of divorce to maximize assets and realize potential tax savings. This is particularly important this year in light of recent changes to the tax laws. The Milwaukee divorce lawyers at Bandle & Zaeske, LLP are experienced in all aspects of Wisconsin divorce law, working with couples to navigate the tax laws, finding the best possible outcome in each situation.
Plan ahead
When divorcing, many couples think about the division of assets, child custody, spousal maintenance, and other matters. Don’t overlook the tax implications of a divorce. Tax considerations are an important part of divorce planning. This includes state and federal tax laws regarding spousal maintenance, dependency deductions, educational expenses for children, and property taxes. By incorporating tax planning in your divorce planning, you can address any potential problems and position yourself for the most favorable tax scenario post-divorce.
Tax exemptions and deductions
Tax exemptions and deductions are impacted by divorce, and should be considered as part of the divorce process. Other matters that should be addressed:
- Tax implications of selling a primary residence shared during the marriage
- Tax implications involved in distribution of assets
- Spousal maintenance
- Dependent child exemptions
- Benefits of filing a joint return or separate filing in year divorce was finalized
- Tax implications of liquidating any long-term investments
- Qualified Domestic Relations Order (QDRO) for dividing retirement assets
Elimination of the spousal maintenance deduction
Recent changes to the tax laws eliminate the existing tax deduction for spousal maintenance payments. Currently, those spouses providing spousal maintenance may deduct the payments on their personal income taxes and those receiving spousal maintenance must report the money as taxable income. The repeal of this law does not impact those couples that are currently paying or receiving spousal maintenance. The new tax law does, however, affect those couples that are divorced after December 31, 2018. Those couples will not be able to deduct spousal maintenance on personal income taxes. It also impacts prenuptial and postnuptial agreements, which typically specify the terms of spousal maintenance should the couple divorce.
Let us help you maximize your assets after divorce
Tax considerations are an important part of divorce planning. By incorporating legal and financial strategies, you can maximize your assets and realize potential tax savings as part of your divorce settlement. At the family law firm Bandle & Zaeske, LLP in Milwaukee, our skilled team works with couples to evaluate the financial implications of divorce and strategically address those issues as part of the divorce process. Be financially prepared for life post-divorce. Contact our office today at (414) 359-1424 or online to arrange for a confidential consultation.