When a person goes through a divorce there are many possible tax implications that can come into play and must be addressed. This section will try and touch upon some of those issues that come up in a divorce that relate to taxes.
Spousal Support is generally tax deductible to the payor of spousal support and is generally taxable income to the person receiving spousal support. There are times when this is not the case. For example, when a person chooses to make a lump sum payment of spousal support rather than make payments on a monthly basis over a period of time. This very well may not be taxable. Many times parties who are paying spousal support are in a position to change their withholdings at their place of employment because of the payment of spousal support. This is because they will not need to have as much tax withheld from their regular pay to meet their annual tax obligation. It is important to make sure you have a complete financial picture.
Divorce Decree Implications:
The parties need to be aware a divorce decree may provide for the parties to sell certain assets and that the profits realized from those sales could result in a tax liability. For example, when the parties have a second home and decide to sell it at the time of the divorce. Since the property is a second home the parties could be subject to taxes due upon the sale. Further, if the parties had been taking depreciation on the property the tax implications could be enormous. These are the types of issues that you need to discuss with your attorney. While most divorce attorneys are not tax professionals they certainly should be able to recognize issues requiring you to sit down with a tax professional to make sure that you are protected to the best extent possible. Further, there are times when a party is looking to sell property in a divorce, but it will not be completed while the divorce is pending and it will have to be completed after the divorce is final. In that situation, the parties need to be cognizant of those tax implications.
Child Support and Dependency Exemptions:
The person who pays child support does not get to deduct it from his or her gross income; nor does the person who receives child support have to include it as part of their income. In Ohio, the legal custodian is presumed to be able to claim the minor child(ren) on their tax returns; however, this is only true in a situation where a court has not allocated the tax deduction between the parents. The tax exemption is often dealt with when a court determines custody, visitation and child support.
Questions about taxes & liability as a result of a divorce?
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