Neither divorce nor taxes are much fun by themselves, so it's no surprise that many people are reluctant to think about how a divorce could affect their taxes. But if you're getting a divorce and you have any amount of marital property, thinking about the tax consequences of divorce now could help you avoid taking a major tax hit later, making a mistake on your tax forms or setting up a financial situation that's unfair to one or both spouses. Common tax mistakes people make right after a divorce include:
- Both spouses or the wrong spouse claiming the children as dependents.
- Splitting investments in a way that subjects someone to a huge capital gains tax bill.
- In marriages with one or more retirement plans, waiting until after the divorce is final to fill out the federal Qualified Domestic Relations Order (QDRO) form.
- Losing capital gains tax protection by selling the marital home after the divorce is final.
- Not claiming alimony (also called spousal support) payments as a deduction for the payer, or not claiming them as income for the payee.
- Claiming child support (as a deduction or as income).
- Not deducting certain allowable legal and financial fees connected to your divorce.
As with all matters related to taxes, this can get complicated very quickly. Some deductions depend on your ability to take other deductions. Others may depend on your marital status; in fact, it may be financially advantageous for some couples to stay legally married for a few more months. And alimony-related issues can have substantial tax savings or penalties attached, because alimony is generally granted only to couples in a high tax bracket. Alabama divorce lawyer Steven Eversole can help you understand some of the complexities of post-divorce taxation and help you save the most money possible.
Avoid A Tax Hit After Divorce
After the financial and emotional difficulties of a divorce, the last thing most people want is another huge bill on April 15. As an experienced Birmingham divorce attorney, Steven Eversole can help. Our firm already helps clients preserve assets through a divorce, a process that takes into account tax consequences as well as the consequences of issues like abuse of joint bank accounts and confusion over who pays the mortgage.
For all clients, the Eversole Law Offices can recommend basic steps to protect your assets right now, tailored to your tax bracket and property situation, both pre- and post-divorce. We start before your divorce is final, to help you choose the best possible filing status and avoid making mistakes when you split your assets. For clients with complicated finances, we can recommend a reputable divorce taxation specialist who can help you understand the details of your new financial situation. And, if it's necessary in your case, we can ask the court for post-divorce modifications to your divorce judgment that help you keep the maximum amount of income.
If you'd like help understanding the tax effects of an Alabama divorce and keeping the most income you can, contact Steven Eversole today for a free case evaluation.