Divorce Taxation Issues

Taxation Issues in Divorce

Understanding the Tax Consequences of Marital Property Division and Support

While the big picture of marital property division is enough for most divorcing couples to consider, an experienced divorce lawyer will be looking at the details, including the tax implications of any proposed divorce agreement.

All of the issues to be decided in a divorce-divisions of property, retirement plans, or pension funds, alimony, spousal support and child support --can have beneficial or costly and will discuses tax issues for couples at any income level.

At Bennett & Associates we provide our clients with a thorough review of the tax consequences of every option under consideration in divorce negotiations and can discuss tax issues with clients and where necessary, we will bring in tax counsel to handle offers of compromise and complex tax issues which are not part of our everyday practice. Contact the divorce attorneys at Bennett & Associates to schedule a consultation.

Knowledgeable and Experienced in Tax Law and Divorce

You will find the legal team at Bennett & Associates to be knowledgeable and well-prepared to assist you in understanding the tax implications of various assets under consideration in your property division case.

Attorney Carla Marino holds a degree in tax law and worked as a business and municipal tax advisor and tax strategist at Ernst & Young and at Pepper Hamilton. With almost 30 years of experience in divorce and property division, attorney Elizabeth Bennett has provided continuing education to accountants on the tax implications of divorce.

Issues to Consider in Property Division: Set forth below, is an incomplete synopsis of key elements of divorce taxation. You should research this issues further with a lawyer or accountant before filing a related return or a final property settlement.

• Tax Exemptions for Children: For most middle income people, the decision about who can claim the child dependency exemption (IRS form 8332) will be very important. There is a significant tax advantage to being able to file as "head of household." The Earned Income Tax Credit may also be available to you.
• Capital Gains from Sale of Residence: Under Section 121 of the Internal Revenue Code, the IRS allows you to exclude from taxation the income you make from the sale of your primary residence (up to a certain amount) if you qualify for the exclusion. Up to sale price of $500K if married and $250 if you are single.
• Division of a Pension or Retirement Plan: While divorcing spouses may be required to divide the assets in a pension or retirement plan, a pension could be disqualified taxed if the division is not done properly, so special rules must be followed. Learn more about pension division.
• Deductibility of Support: Alimony is tax deductible, but child support is not.

Tax Filing Considerations

There is a great deal of strategy involved in tax filing during divorce. We can advise you on whether to file jointly or separately during the divorce proceedings. If you have concerns about possible tax fraud being committed by your spouse, we can assist you in seeking an innocent spouse ruling and in amending any fraudulent returns.

To learn more about the tax implications of divorce, contact our Wayne, Pennsylvania law office to schedule a consultation. We also refer you to IRS publication 504.