Tax Strategies That Could Simplify Your High Asset Divorce
The tax reform laws that went into effect early last year have had a significant impact on American taxpayers, especially couples with diverse or valuable assets who are attempting to obtain a divorce. Fortunately, there are a few tax strategies that can help divorcing couples reach a settlement agreement that is in all parties’ best interests. For help navigating your own complex divorce, please contact a dedicated high asset divorce lawyer who has the resources and experience to assist and advise you.
Selling the Family Home
Spouses who have made the decision to file for divorce are encouraged to take a number of steps that could assist them with their tax situation following the dissolution of their marriage. Selling the family home, for instance, can save couples a significant amount of money following divorce. This is largely due to the fact that property taxes are now no longer fully deductible, which means that if one party retains the family home, he or she could end up with a much higher property tax payment that in previous years. Similarly, selling secondary real estate or vacation homes can help couples consolidate their funds and secure their financial future going forward.
Negotiating the Value of Dependents
Tax experts also recommend that divorcing couples with significant assets who also share children, negotiate the value of those dependents during the settlement process. This is an important step because the recent tax reform also lowered the exemption that a parent can claim for each child, although the child tax credit was increased from $2,000 to $1,000. Unfortunately, that credit begins to phase out for those with $200,000 or more of income. However, this can be countered through negotiation by allowing the lower-earning spouse to claim those credits in exchange for other assets.
Moving Alimony into a Trust
As a result of the changes made by the Tax Cuts and Jobs Act last year, spouses who pay alimony are no longer permitted to deduct the cost of those payments come tax season, while the receiving spouse is no longer required to claim those payments as income. Unfortunately, this has had the effect of making alimony payments more costly for the paying spouse by eliminating the tax break that helped jumpstart negotiations. Couples with significant assets could be able to account for this change by setting up trusts that will pay out the income equivalent in alimony payments, but without the tax burden. As long as the trusts are funded with assets that generate income, the funds will usually be considered a property settlement, and as such, will not be taxed in the same way as typical alimony payments.
Contact Our Leander High Asset Divorce Legal Team
To begin working on your own divorce with an experienced Leander high asset divorce lawyer, please call Powers Kerr & Rashidi, PLLC at 512-610-6199 today. A member of our legal team is standing by to help with your questions and concerns.
Sources:
https://www.congress.gov/bill/115th-congress/house-bill/1/text
https://www.nytimes.com/2019/04/19/your-money/taxes-tips-divorce.html