Tax Implications of Divorce Property Transfers

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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Four Tax Considerations For Divorcing Couples

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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How To Avoid Major Divorce Planning Mistakes

Over the past two weeks I have read three financial planning articles on the web, and you might say I was strongly compelled to write about it. Apparently some estate planners have been recommending that after your divorce you should change your will, living will, medical directive and power of attorney. From a practical standpoint, the last thing you want to do is to wait until after your divorce is final to change your Last Will and the associated legal documents. You should seriously review and consider making changes before you even begin to plan for your divorce. In many states attorneys may tell you that once initial papers are… Read More

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Alimony Income and Mortgages

Question:  IS ALIMONY INCOME FOR MORTGAGES PURPOSES? Below is a recent question from a current client. It is a two-pronged questions involving alimony qualifying for mortgage income and her husband’s lucrative business. “I have a question about going for a loan. If I was able to keep our home and had to refinance, will the lender accept maintenance (alimony) as part of my income? I make very little money now as I have been a stay at home mom for the past 15 years and my husband has his own business which he nets about $200,000 per year. One of our agreements is that I keep the house and don’t… Read More

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Tax Filing Status During Divorce

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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Divorce Financial Planning-Disaster Prevention

Like many people, on Sunday mornings I like to read financial news articles while I have the two cups of coffee to get me going for the day. And I usually skim through and like many of us, half read the articles. However today I began reading and became entrenched in a Huffington Post blog article about divorce settlements and planning. It was written by a divorce attorney who has obtained a Master’s degree in counseling and psychology. Interesting I thought, so I read on. Review Divorce Financial Advice Cautiously She spoke about a number of accurate topics regarding settlement agreements and how many women end up with a lifestyle… Read More

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