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What are some possible tax consequences of divorce?

On Behalf of | Dec 29, 2020 | Uncategorized

Taxes are one extra complexity that can affect a New York couple trying to divorce, and many may prefer just not to worry about it.

However, the reality is that a White Plains couple’s divorce can have federal and state tax consequences in a number of respects.

Most divorces are going to have some tax consequences

New Yorkers should not assume that tax consequences only affect divorces involving people of means. One of the most common tax consequences is that, once divorced, a couple will not be able to file a joint tax return.

Moreover, depending on the couple’s custody and support arrangement, either side may not be able to claim his or her child or children as dependents for tax purposes, a fact which could increase his or her tax bill substantially.

There are possible tax consequences to transfers of property

Generally speaking, a couple is allowed to transfer property between themselves when doing so is part of their pending divorce or final settlement.

They may do so without having to worry about paying the federal capital gains tax on profitable investments that a person sells.

However, this does not mean that a person receiving the property does not have to worry about paying taxes at all.

Income-related taxes on investment property, for instance, and the couple may have to work out who will pay property taxes on any real estate they are dividing.

Furthermore, someone receiving property needs to realize that while they can do tax free as part of the divorce, capital gains taxes may apply if they go to sell the property at a later date.