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Tax issues to consider in a divorce

On Behalf of | Jun 4, 2020 | Divorce |

Spouses in Hardin County who are getting a divorce should take time to familiarize themselves with both state and federal tax law since their taxes may soon change. They’ll be able to file as single after the divorce, but when that actually happens is usually determined by their marital status on the last day of the year.

Since the passage of the Tax Cuts and Jobs Act, it is no longer possible for an alimony payer to deduct that payment from taxes. The act also eliminated the dependent exemption. People who plan to sell a home might want to complete the sale before the divorce is final because the tax situation is generally more favorable for married people who sell a home than for single people.

The selling or dividing of other types of assets might also affect taxes. Couples who must divide retirement accounts such as a 401(k) need a document that is known as a qualified domestic relations order. This is not necessary for an IRA because splitting it as a result of divorce is not a taxable event. However, people may want to find out whether they can avoid the 10% penalty for splitting. A financial professional with a background in divorce might be helpful.

An attorney may also provide valuable guidance. One could talk with a divorce attorney about issues such as property division and child custody. If the person does decide to go through with the divorce, this does not necessarily mean that going to court is inevitable. Many couples successfully negotiate a divorce agreement with the help of their attorneys without going through litigation. In most cases, this option is less expensive, less stressful and less time-consuming.