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No divorce plan is complete without considering the tax consequences. Here are a few of
the highlights to keep in mind.
 | Alimony/Maintenance. Usually deductible to the payor and taxed as
income to the payee, if the IRS requirements are met. See
IRC §71. Here is the
explanation of the
alimony
rules from the IRS. |
| Tax liability on assets. Not
all assets are equal. A checking account filled with after-tax dollars is much
more valuable than an appreciated asset with a low basis. The
exclusion for gains on residences
can make the house particularly
attractive.
Transfers of assets pursuant to the divorce do not generally trigger a tax, if you follow
the rules. Here's how the IRS explains the
property rules. |
| Dependency exemptions. Figuring out who should get the
exemptions for the kids is more complicated with the child tax credit
(exemption and credit must go together). Its worth putting a pencil to it because it can save some dollars. Here is the
IRS dependency
exemption explanation. |
| Costs of getting a divorce. The legal fees for your divorce are not deductible unless
they are for tax advice or to obtain alimony. Some expert fees may also be deductible. IRS
explanation on
divorce fees. |
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