Tax Mistakes to Avoid in Your Miami Divorce

Divorce is a significant financial event. Men and women who undergo a divorce must carefully plan for their financial futures. One issue that should not be overlooked is the tax consequences of ending your marriage. The advice of an experienced lawyer is a significant asset. Contact Hamilton O’Neill today to arrange a consultation with our office. Below, we highlight a few of the tax issues we help clients navigate.

Transfer Rules Regarding Retirement Accounts

Many of our clients have substantial retirement accounts, especially after decades of marriage. Most of the assets in these accounts will be considered marital property, which means you might end up dividing one or more of them. However, federal rules limit your ability to transfer funds penalty-fee.

To withdraw funds without any penalties, you will need a Qualified Domestic Relations Order, or QDRO for short. This document contains important information about the division and transfer of the account and is directed toward the plan administrator. Reach out to our office so that we can help you avoid unnecessary penalties.

Alimony & Taxation

Anyone seeking a divorce must consider federal tax law regarding alimony for any divorce finalized after 2018. It can substantially impact your finances. The person who pays alimony will have to pay taxes on the income, which means the financial impact is that much greater.

Many divorcing couples try to negotiate alimony, so you should consider how alimony is taxed. That might influence how much you are willing to pay or accept as part of negotiations.

Claiming Children on Tax Returns

One dispute post-divorce involves which parent can claim the children as dependents on their tax returns. Mistakes in this area can result in penalties and possibly investigation by the IRS.  Be sure to raise this issue in negotiations so that there is no confusion when tax season rolls around.

Capital Gains When Selling Your Marital Home & Other Assets

Many people end up selling the marital home after divorce. Possibly, you need to sell because one spouse cannot buy out the other spouse’s share. In other cases, you simply want to move, so it is time to sell so you can buy your next home. Too many people overlook capital gains taxes on their home, as well as any other asset that they sell. These taxes can take a big bite out of your home’s equity. Some clients might actually decline to take any equity to avoid taxation.

Selling Business Interests

Divorce is also a time when one or both spouses end up selling business interests. There are tax consequences for selling corporate shares or dividing partnership interests, as well as selling a sole proprietorship. A divorce attorney can help with valuation and determining how to calculate your tax obligations triggered by the sale.

Contact Hamilton O’Neill for Professional Guidance

Divorce has led to financial ruin for countless people. Take control of your financial future by contacting our law firm to speak with a Miami divorce tax lawyer. We can go over your goals for life after divorce and work to minimize taxes.

Source:

irs.gov/taxtopics/tc409