Tax Consequences Of Divorce

The Biviano Law Firm provides effective legal guidance for professionals, business owners, salaried and self-employed clients regarding income tax implications and divorce. We understand the financial effects of divorce. Attorney Biviano serves clients in divorces with tax issues affecting their settlement.

When the court awards spousal support (also called "alimony"), the spousal support generally must be included as taxable income to the party who receives it and it usually is tax deductible by the party who pays it until the end of calendar year 2018. People who pay and receive spousal support are frequently in a relatively high tax bracket. For this reason, the tax consequences of a spousal support award should always be taken into consideration when negotiating a spousal support case or presenting the case to the court.

Financial And Tax Considerations In Divorce

Another important tax factor to be considered in a divorce with minor children is the allocation of the tax dependency exemption and the child tax credit. The exemption and the credit can be worth thousands of dollars per year depending on the number of children involved. As a general rule, the residential custodial parent could be entitled to claim the minor children as a tax dependency exemption and claim the tax credit. However, there are fact and income level specific exceptions to this practice and the court can, under certain circumstances, award the noncustodial parent the right to claim the exemption and the credit or provide other offsetting financial relief.

Allocation of the tax dependency exemption may be modified by the court upon the filing of a motion by either party. If it can be shown that it would be in the best financial interest of the child for the nonresidential parent to claim the child as a tax dependency exemption, the court can award the exemption to the noncustodial parent. Where there is more than one child of the marriage and one of the parties has a small amount of income, the tax dependency exemption and child tax credit could be wasted if that party attempts to claim all of the children. At certain income levels, claiming more than one child may not increase the tax refund of the lesser earning parent, whereas the party with greater income could save thousands of dollars each year if the tax dependency exemptions are properly allocated. For this reason, allocation of the tax dependency exemptions is a very important part of every divorce with minor children.

Contact Us

Do you have questions about the tax consequences of divorce or dissolution of marriage? For effective legal counsel regarding divorce tax law, call our law office at 330-392-5000 or contact us online.