Negotiating Divorce Settlements
FEDERAL INCOME TAX AND IT’S IMPACT ON YOUR DIVORCE SETTLEMENTS
negotiating divorce settlements It’s tax time again and for those of you that are negotiating divorce settlements don’t forget to consider the tax implication of your agreement. For example, if you are receiving alimony, you need to consider how much of it will be owed in taxes. You then need to come up with strategies to minimize the tax affect such as retaining the marital home so you have mortgage interest that you can deduct from your alimony. Although, tax issues are usually dealt with by your tax adviser, Marina Taylor, an experienced divorce and family law attorney in Brandon/Riverview Florida can help you with this general tax advice.
The other tax implications that should be considered for those who have children is who is going to take the child tax dependency deduction yearly. Generally speaking, parents alternate it yearly but depending on the financial positions of the parent, it may be that one parent will not benefit from it so giving it solely to the parent that needs it may be a good negotiating point.
Finally, when distributing property, don’t forget to consider what assets have tax implications when sold versus those assets which have been purchased with after tax dollars. For example, a 401 (k) plan may appear to be valued higher than the cash surrender value of a life insurance policy but the difference is that the 401(k) is funded with before tax dollars and typically the life insurance is funded with after tax dollars. Marina Taylor, an experienced divorce and family law attorney in Brandon, Florida will give you general advise on this matter and refer you to a CPA to give you an opinion on your potential tax liability on various property distribution scenarios before you sign on the dotted line.