Legal Advice And Guidance Involving Tax Issues And Divorce
Tax issues can be an important factor when negotiating a divorce settlement, affecting decisions concerning the division of community property, child support and spousal support. This is particularly true in a high-tax state such as California. High-asset couples, high-income couples and middle-income couples must come to grips with tax issues in divorce.
At the Lauzon Paluch in Los Angeles, we fully analyze tax aspects when negotiating divorce settlements on behalf of our clients. Our goal in every case is to help our clients obtain the optimal divorce settlement given their personal and financial needs.
How Taxes Affect The Different Elements Of A Divorce Settlement
Some of the taxation factors to be considered during the divorce process include the following:
- Spousal support payments are tax deductible for the payer and treated as taxable income for the receiver. Child support, however, is tax neutral.
- In a divorce involving a business, there may be tax liabilities or unrealized tax credits that are not fully accounted for on a balance sheet.
- Only one parent can claim a child tax exemption and child care expense deduction in any given tax year. It may be possible to make a provision in the settlement to account for this.
- Do the spouses owe federal or state income taxes for the current year? Are they in tax arrears? If so, provision must be made in the property settlement such as assigning a greater tax burden on the higher earning spouse.
- Selling investment assets or real estate may trigger sizeable capital gains taxes. On the other hand, it may be possible to transfer title to those assets to avoid immediate tax liabilities, though the assets will still carry unrealized tax liabilities.
Ensure That You Have Proper Guidance
The divorce lawyers at the Lauzon Paluch frequently work with CPAs, outside tax accountants and our clients’ tax accountants who can provide guidance regarding tax issues. Ultimately though, it is the client’s decision. When representing you, we will ensure that you have all of the information you need to decide on the best course of action for your particular circumstances.