Tax season has just barely passed, but it is never too early to start thinking about the tax implications of your impending New York divorce. Filing taxes after your divorce can be a rather tricky task, with deductions, credits and a variety of other complications. Dividing up assets and property can be an arduous and complicated task, depending on the nature of those holdings. Divorce attorneys can help you lay the foundation for long-term financial stability during your property division — even if there are some unpleasant tax implications.
Did you know that alimony is considered taxable income, though child support is not? Even though you may experience a drop in income in the wake of a divorce, you could actually experience a hike in your tax rate, simply because you are receiving spousal support. Alimony can sometimes seem too good to be true — check the tax implications before you decide that spousal support is your best option.
Other assets can also lead to tax headaches. Your family home could actually cause serious problems if you choose to sell it. Although married couples can safely experience a $500,000 gain, single Americans are only allowed a $250,000 gain. Your marital home, along with other real estate or business holdings, could actually make taxes far more complicated.
On the other hand, parents with primary custody of their children are able to enjoy tax benefits provided by the dependency exemption. Parents can deduct nearly $4,000 from their taxable income for each child in the household. There are some specific rules for claiming this exemption, so talk to your tax adviser before you do so.
Ultimately, no two divorces are exactly alike, so it is hard to tell whether a breakup will be beneficial or harmful to your tax situation. New York attorneys may advise clients during the property division proceedings, allowing them to maximize tax benefits by obtaining the appropriate assets. Planning ahead for future tax bills may help reduce the future financial impact of such asset allocation.
Source: Huffington Post, “4 Things To Know About Filing Your Taxes After Divorce” Lauren Young, Reuters, Apr. 10, 2014