Florida Divorce: What You Need to Know About Tax Planning
When getting divorced, there are many complex issues that you will need to resolve. Along the way, many things can get overlooked. Indeed, one thing that gets overlooked by many divorcing couples: Taxes. Your divorce could potentially have significant tax ramifications. As such, you need to be fully prepared for the process.
To ensure that your assets are protected and that you are not subject to any avoidable IRS penalties, you need proper divorce tax planning. Here, our experienced Clearwater divorce attorney highlights a few of the things you need to know about divorce and taxes.
Child Tax Credits and Exemptions
Parents need to be aware of the fact that a divorce could potentially impact their ability to claim a child tax credit and other related tax exemptions. As such, it is also important for divorcing parents to have a qualified attorney review this issue. Under the current federal tax law, parents are allowed to claim a tax exemption for all of their dependent children.
However, this exemption may only be taken once. In other words, when parents get divorced, only one spouse (the custodial spouse) will be entitled to take this tax exemption in the future. But who claims the tax deduction is subject to negotiation and can be changed by the Court during the course of litigation. Double-claiming an exemption could lead to major headaches. Of course, non-custodial parents may still take certain tax deductions for their children when appropriate. For example, if a non-custodial parent paid out-of-pocket medical expenses for their child, those costs can be deducted.
For many couples, a divorce can have a dramatic impact on their retirement planning. Indeed, in the modern world, the proceeds of a retirement account often comprise one of the most valuable assets that a couple owns. As a result, retirement accounts and retirement benefits often become a top issue in asset division negotiations. It is imperative that divorcing couples handle their retirement benefits carefully when splitting up their assets. If you make early withdrawals from tax-advantaged retirement accounts, you may be hit with sharp penalties by the IRS. Please always work with a Florida divorce lawyer who can help you set up a proper qualified domestic relations order (QDRO).
If you and your spouse own a house together, a decision will need to be made on what should be done with that property. In some cases, couples work out an agreement where one spouse remains in the house. In other cases, couples agree to sell their home. Ultimately, this is largely a personal lifestyle choice. However, it should be noted that for some couples, particularly for high asset couples, the sale of a home may trigger capital gains tax liability. This cost should always be taken into consideration during the divorce negotiation process.
Contact Our Office Today
At the Law Office of Gale H. Moore P.A., our family law team has extensive experience handling complex divorce matters, including high-asset divorces. If you are need of legal assistance, please do not hesitate to contact our office today at 727-584-2528. From our office in the heart of Largo, we serve clients throughout the region, including in communities such as Clearwater, Seminole and Belleair Beach.