Divorce and Tax Applications

There are lots of ways to divide your assets in your divorce, and many considerations to look at when creating a plan. One factor that is often overlooked are the tax implications. It may seem as if there are no tax implications at all since the transfer of marital assets in a divorce is not a taxable transaction (if certain requirements are met). What you do need to consider is that there are tax implications down the line that could stem from what you do with those assets.

One of the biggest considerations is the marital home. If there are plans to sell the home, it often makes more sense to do this before the divorce is final, since together you get a $500,000 exemption on the appreciation of the value of that property. If the home is transferred to one spouse and sold after the divorce, there is only a $250,000 exemption, making more of the value of the home taxable. This could be a significant amount.

Another item that has tax implications that is often overlooked are investments. If investments are going to be sold, it may make more sense for them to be transferred to the spouse with the lower income so that they are taxed at a lower rate. When dividing stocks and investments, it is important to work with a tax advisor who can evaluate the embedded capital gains. Even if you and your spouse take accounts of similar value, they may have completely different tax implications that significantly impact their true value.

The Sampair Group helps you consider all of the issues involved in your divorce so that you can make wise decisions in Glendale, Phoenix and Mesa, Arizona.