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What are the tax considerations in a divorce?

When life changing matters are confronted by Florida residents, individuals understandably focus on the most important issues. In a divorce, the individual frequently puts a great deal of focus on issues of child custody, child support and property division.

For example, this blog recently discussed the process of asset division, which can be very complex when there are significant assets at stake. The parties may dispute whether certain assets are considered marital property, and what valuation should be placed on those assets.

While the focus on the assets themselves is understandable, there are other issues that need to be considered as well when drafting settlement agreements or approaching trial. For instance, divorce involves important tax considerations that must be taken into account, in multiple areas of the divorce.

Child custody issues are a good example of this. While the parties often focus on custody, visitation and child support, they should also understand the related tax considerations with these issues. The dependency deduction for children can be important, along with whether or not child support payments are deductible.

Likewise, there are tax considerations in the asset division process as well. When property is transferred, there may be tax consequences that could have a significant impact on the transaction. Moreover, mortgage interest deductions and similar tax issues should be considered with the family home.

The bottom line is that individuals should be aware of the tax considerations before final decisions are made in the divorce. Otherwise, they may find out after the fact that they are going to be hit with a large tax bill because of the way things were handled in the divorce, or they may lose out on deductions they would have otherwise been able to claim.

Source: The Florida Bar, "Divorce in Florida pamphlet," accessed on Dec. 5, 2015

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