Divorce Tax Consequences

By Wisselman, Harounian & Associates  Oct. 22, 2012 10:40a

Divorce is generally painful enough in terms of the emotional toll it takes on individuals. It can also create financial stress in terms of tax consequences. Without the guidance of a knowledgeable attorney, those who go through the divorce process can make mistakes which can create tax liabilities for which they may be unprepared. An example of this concerns potential capital gains on assets, such as the family home, other real estate properties, mutual funds, or investment accounts. If your home is worth more when you divorce than its original cost, you may create a capital gains liability should you sell it as part of the divorce process. For example, if you paid $200,000 for your home and later sell it for $300,000 in a division of marital property, you may have a capital gain of $100,000 unless you have occupied the home for two out of the last five years.

Other tax consequences may be incurred if, through the divorce settlement, funds are taken out of an account that is considered restricted, such as a pension fund. Another consideration is that those going through a divorce may wish to change their filing status from a joint return to an individual return, which can also have an impact on tax liability. Generally, joint tax returns incur less of a liability than do separate ones. Also, where children are involved, the parent who provides the lion's share of support for the child will generally be allowed dependent deductions. Every divorcing couple's financial situation will be different, based on individual circumstances. To get a clear understanding of how your divorce will affect your tax picture, it is always best to consult with a qualified lawyer.

Long Island Divorce Law Firm

The highly respected family law firm of Wisselman, Harounian & Associates has been practicing New York divorce and family law since 1976; its attorneys have more than 150 years of combined experience in this field. The principal attorneys have been distinguished as "Super Lawyers" and have authored many articles and lectured on the legal aspects of divorce.

When faced with the prospect of divorce, you will want an attorney you can count on who has the skills and abilities you need to handle every aspect of the divorce process, including the financial one involving potential tax consequences. Contact the firm for a free consultation about your divorce. Ensure that your legal rights and benefits are fully protected.

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