It is important to consider tax consequences in divorce

In the process of dividing up property, a couple needs to consider the tax consequences of their decisions.

Just about every couple will face some tax-related fallout from a divorce. For example, after a divorce, the couple can no longer take advantage of the “married, filing jointly” status. This can have negative tax consequences for which people will need to prepare.

As another example, the IRS has established rules and procedures for determining which parent gets to claim child and dependency credits. When a couple has dependent children, a divorce decree should address which parent will be allowed to take these valuable tax credits.

High-asset couples should be thoroughly prepared for tax consequences

Those who have high assets may have additional tax consequences they will need to consider.

To give one example, a couple with a high-value home or who owns investment properties will have to think about capital gains tax. The capital gains tax, in many circumstances, would not apply to transfers during a divorce. Generally, the person who ultimately gets ownership of this real estate would have to pay capital gains taxes if they want to sell the property down the road. The upshot is that a person who agrees to accept a piece of real estate, especially an investment property, should take account of the capital gains tax they will likely pay in the future. The divorcing couple must make sure that they are aware of the IRS’s and any other applicable rules in this matter.

In a high-asset divorce, other complicated tax situations can arise as well.  An experienced legal professional, working with an accountant when necessary, is helpful for resolving these issues.