Understanding The Tax Implications Of Divorce

If you are considering divorce, it's important to plan for it. Part of your planning should be talking to a knowledgeable attorney about tax implications of your divorce settlement.

At The Law Office of Patricia A. Hendrickson, based in Huntington Beach, California, our lawyers are here to protect your financial interests in divorce. Call 714-362-2413 for a free initial consultation.

The Tax Implications Of Divorce

Without legal advice, it's very easy for one side to take advantage of the tax implications of divorce to the detriment of the other side. Here are just some of the issues you should discuss with your lawyer:

  • What is the tax status of the marital property you are dividing? Some assets may be taxed as a long-term capital gain when sold, others as a short-term capital gain (subject to higher taxes). Other assets, such as cash, would not be subject to taxation when divided as part of a divorce settlement.
  • Are you receiving or paying alimony? Alimony is taxable to the person who receives it and deductible to the person who pays it.
  • Are you dividing retirement assets? Those assets will be subject to a penalty tax if distributed early. A 401(k) account is taxable as ordinary income when distributed, while a Roth IRA is not subject to taxation.
  • Do you have dependent children? Only one parent can claim the dependent tax deduction.
  • Do you and your spouse file income taxes jointly or separately? Depending on how you file taxes, our lawyers may be able to do certain things to protect you from any tax liabilities your spouse may have.

Prior to filing for divorce, we encourage you talk with one of our knowledgeable attorneys about your situation. Our goal is to protect your interests and reach an agreement that is as favorable as possible.

For More Information About Taxes And Divorce

For more information about the tax implications of divorce, call 714-362-2413 or complete our simple contact form to schedule a free initial consultation.