{"id":16094,"date":"2022-07-16T16:36:00","date_gmt":"2022-07-16T21:36:00","guid":{"rendered":"https:\/\/sfwpartnersllc.com\/?p=16094"},"modified":"2022-07-16T16:36:00","modified_gmt":"2022-07-16T21:36:00","slug":"five-tax-implications-of-divorce","status":"publish","type":"post","link":"https:\/\/www.sfw.cpa\/news-and-guides\/five-tax-implications-of-divorce\/","title":{"rendered":"Five tax implications of divorce"},"content":{"rendered":"

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Are you in the early stages of divorce? In addition to the tough personal issues that you\u2019re dealing with, several tax concerns need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are five issues to consider if you\u2019re in the process of getting a divorce.<\/p>\n

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  1. Alimony or support payments. <\/strong>For alimony under divorce or separation agreements that are executed after<\/em> 2018, there\u2019s no deduction for alimony and separation support payments for the spouse making them. And the alimony payments aren\u2019t included in the gross income of the spouse receiving them. (The rules are different for divorce or separation agreements executed before 2019.)<\/li>\n
  2. Child support. <\/strong>No matter when the divorce or separation instrument is executed, child support payments aren\u2019t deductible by the paying spouse (or taxable to the recipient).<\/li>\n
  3. Personal residence.<\/strong> In general, if a married couple sells their home in connection with a divorce or legal separation, they should be able to avoid tax on up to $500,000 of gain (as long as they\u2019ve owned and used the residence as their principal residence for two of the previous five years). If one spouse continues to live in the home and the other moves out (but they both remain owners of the home), they may still be able to avoid gain on the future sale of the home (up to $250,000 each), but special language may have to be included in the divorce decree or separation agreement to protect this tax exclusion for the spouse who moves out.
    If the couple doesn\u2019t meet the two-year ownership and use tests, any gain from the sale may qualify for a reduced exclusion due to unforeseen circumstances.<\/li>\n
  4. Pension benefits. <\/strong>A spouse\u2019s pension benefits are often part of a divorce property settlement. In these cases, the commonly preferred method to handle the benefits is to get a \u201cqualified domestic relations order\u201d (QDRO). This gives one spouse the right to share in the pension benefits of the other and taxes the spouse who receives the benefits. Without a QDRO the spouse who earned the benefits will still be taxed on them even though they\u2019re paid out to the other spouse.<\/li>\n
  5. Business interests.<\/strong> If certain types of business interests are transferred in connection with divorce, care should be taken to make sure \u201ctax attributes\u201d aren\u2019t forfeited. For example, interests in S corporations may result in \u201csuspended\u201d losses (losses that are carried into future years instead of being deducted in the year they\u2019re incurred). When these interests change hands in a divorce, the suspended losses may be forfeited. If a partnership interest is transferred, a variety of more complex issues may arise involving partners\u2019 shares of partnership debt, capital accounts, built-in gains on contributed property, and other complex issues.<\/li>\n<\/ol>\n

    A variety of other issues<\/strong><\/p>\n

    These are just some of the issues you may have to deal with if you\u2019re getting a divorce. In addition, you must decide how to file your tax return (single, married filing jointly, married filing separately or head of household). You may need to adjust your income tax withholding and you should notify the IRS of any new address or name change. There are also estate planning considerations. We can help you work through all of the financial issues involved in divorce.<\/p>\n

    \u00a9 2022<\/em><\/p>\n

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    Are you in the early stages of divorce? In addition to the tough personal issues that you\u2019re dealing with, several tax concerns need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are five issues to consider if you\u2019re in the process of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,6,10],"tags":[8,11,12],"class_list":["post-16094","post","type-post","status-publish","format-standard","hentry","category-articles","category-individual-tax","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16094","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16094"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16094\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16094"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16094"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16094"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}