Tax Implications of Divorce Property Transfers

Ellen Wanamaker

When property and financial assets are divided in divorce, certain assets or portions thereof are transferred from one spouse to the other. The most common are the marital home, financial accounts and jewelry. During the marriage, such transfers are considered to be gifts of a non-taxable nature. Transfers for purposes of divorce are subject to specific regulations in order to maintain the same non-taxable status. As per the Internal Revenue Service Publication 504, Divorced or Separated Individuals , the following are required:   Transfer Between Spouses Generally, no gain or loss is recognized on a transfer of property from you to (or in trust for the benefit of): Your spouse,… Read More

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How the New 2018 Tax Law Impacts Alimony Payments

Ellen Wanamaker

Alimony tax laws (for spousal support) are changing.   The Basics of Alimony Alimony payments are based on the earned income of the husband and wife individually. There is a formula that determines the amount the higher earner will pay the lower earner. It is an attempt to generally equalize earnings for both individuals and at the same time attempt to allow them both to continue to maintain a similar lifestyle to their pre-divorce situation. The key word is attempt. This is not always possible.   Pre-2018 Alimony Tax Laws Before and during the divorce process any support received is generally not considered alimony. Therefore it is not claimed as… Read More

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Four Tax Considerations For Divorcing Couples

Ellen Wanamaker

Tax season is upon us, and many divorcing couples need to think about what to do now, and what they should know for the future. 1. Consider filing a joint tax return during your divorce. If you are married there are two choices – married filing jointly or married filing separately. However if your spouse is a bit “aggressive” with his or her deductions and you sign that return, you will also be liable for any future tax balances and penalties, so be cautious.  When filing separately the same income is subject to a higher tax, which is a penalty of sorts. Also certain deductions are disallowed. In the case… Read More

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Who Claims Tax Deductions For The Children

Ellen Wanamaker

Question: Which parent claims the tax deduction for the children on their return? Answer: Dependent tax deduction for the children generally default to the parent who has primary custody. Even with shared custody, one of the parents has the children in their home more than the other. During a separation, there may not yet be a formal agreement on this issue. In that case, by counting these overnights on the schedule you can determine who actually had more overnights. The exemption also depends upon who pays more than 50% of the child’s living expenses. Even if you are receiving support, which is usually called Pendente Lite (during the penancy of… Read More

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Tax Filing Status During Divorce

Ellen Wanamaker

Question: If we do not use the married filing jointly filing status before the divorce, what are the tax ramifications? Whenever possible it is typically advantageous to file a joint tax return. This generally insures savings for you both. For each filing status the Internal Revenue Service applies tax rates from varied charts. The alternative, married filing separately, has a much higher tax rate. For couples who can not tolerate being together in the same room to have a joint tax return prepared, an alternative is to agree on one tax preparer and separate appointments. Is Your Tax Filing Status Situation An Exception? Having comparison returns prepared with the filing… Read More

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Is Support Taxable During Your Divorce?

Ellen Wanamaker

Here’s the short answer: Before and during the divorce process any support received is generally not considered alimony. Therefore it is not claimed as income by the recipient or as a deduction by the payor. As with all tax laws, there are exceptions but these are very specific and they are not so common. In many states payments to you can be termed unallocated support or “Pendente Lite” support (Latin for during the pendency of the divorce). Whatever the name, it is not a tax consideration until after there is a written agreement or Court order, typically at the time the final divorce is entered with the Court. Federal tax… Read More

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