The financial part of divorce can be an ordeal, particularly when considering the tax implications. We are continually amazed by the number of divorce settlements, even some designed by professionals, that have no tax provisions. Whether it is realized or not, taxation issues will have a long-term effect on both parties’ financial future.
Understanding the Broad View of Tax Savings
Whenever clients who are undergoing a divorce approach us about financial assistance, we understand that diligent planning is vital. Although emotions may be high, it is only through careful fiscal planning that future legal and financial pains can be avoided. One important aspect of this transition is taxation.
The more income and assets that are part of the marriage, the more chances there are to lose them due to taxation. Likewise, the fewer things that are taxed, the more both parties will have to divide. Hence, a great starting point is determining two main categories, specifically:
- Property allocation
- Dividing financial assets
Our financial team has successfully navigated divorce tax planning for countless clients.
Every divorce has its unique circumstances. No simple solution exists that applies to every divorce tax planning. Each situation requires a consideration of all the working parts of the marriage. However, there are major tax issues that we will need to be addressed. For instance:
- Tax rate changes after the first year of divorce
- Tax implications of waiting to finalize the divorce instead of finalizing the divorce at the end of the year
- If minor children are involved, who will count the dependency tax deduction?
- Property tax & mortgage interest deductions.
- Taxes and alimony payments.
- Transfer of assets (liquid and non-liquid)
- Tax implications of spousal buyouts
The above matters are just a few of the areas that should be covered during a divorce tax planning session. Pacific Tax and Financial Group is available to assist you during your time of need. Do you have specific questions in mind now or would like to with one of our specialists in person? If so, contact us at the number below or stop by our office.
Pacific Tax & Financial Group
955 Boardwalk #203
San Marcos, CA 92078-2659