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Don’t overlook taxes in a divorce agreement

On Behalf of | Jan 6, 2020 | Divorce

Couples who are divorcing in Alabama should not ignore tax issues that emerge during the separation process. Not only are there questions about filing, but there may also be potential tax payments due to the government. This is something that spouses must prepare for in order to minimize complications of the divorce.

One of the common issues that soon-to-be exes face involves handling their taxes before they are divorced. The usual rule is that they must file as married until the divorce is final, but that could cause friction if the couple wants to file separately. They should consider what tax benefits they will lose if they do not file a joint return.

In addition, one or both spouses may end up owing capital gains taxes based on how the property is divided in the divorce agreement. For example, if one spouse ends up retaining property, there may be gains built into the value of the asset. If they sell the property in the future, they will owe the government money. This lowers the value of the property that they are getting in the divorce agreement. Sometimes, the tax treatment of property depends on whether the couple is married or divorced at the time that the property is sold.

These issues are not something that the average spouse and taxpayer would know when they are going through a divorce. They could benefit from the assistance of a divorce attorney who may raise issues such as how taxes affect provisions of the divorce agreement. The attorney might also counsel their client on how things such as alimony would impact the bottom line.


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