When a couple is divorcing and one of their main concerns is division of property, they hardly ever think about the tax consequences they will encounter down the road.
When it comes to child or spousal support, these issues are treated differently under the tax laws. For example:
· A parent who pays child support cannot deduct it from his or her taxes. However, they
may be able to claim that child as a dependent if it has been negotiated as part of the
support agreement.
· The person paying spousal support can deduct 100 percent from his or her taxes.
However, the recipient will be required to declare that money as taxable income.
· Sometimes it may be beneficial to negotiate other forms of support, such as paying the
mortgage or contributing to household expenses.
The division of an IRA or pension account must be handled in the correct manner or penalties and taxes will come into play.
Tax consequences play an important part in the division of property and other family issues in a divorce. There are many ways to reduce your taxes and many mistakes you can make if you do not consider tax consequences during your divorce. It is important to contact an experienced Orange County Divorce attorney who will discuss all the information you need to make informed decisions.
