Divorce settlements for Florida couples can become highly complicated, especially if they have considerable assets. One of the aspects that soon becomes apparent as couples enter the process is minimizing the amount of taxes they will have to pay, especially when alimony is involved.
Tactics to safeguard your money
Focusing on how alimony payments will affect your taxes is a crucial step in protecting your assets. Before January 1, 2019, anyone making alimony payments as part of their divorce settlement can deduct those payments from income taxes. If you are in the midst of a divorce, think about other ways to protect your money. Part of protecting your money is understanding how maintenance payments work. The terms of maintenance payments include but are not limited to:
- Spouses don’t file a joint income tax return
- Payments made in cash
- Spouses aren’t members of the same household when payment is made
- There is no liability to make payments after the death of the spouse
- The payments don’t count toward child support or a property settlement
In most cases, you will not owe taxes on property transfers in a divorce settlement. Any property transferred as part of a divorce keeps its tax basis. Tax laws allow you to begin transferring property for up to two years before finalizing your divorce.
Tax planning steps for divorce
Finding a creative way to divide your marital property in a divorce is one way to decrease your tax burden following the final decree. Consider working with divorce mediators and financial planners specializing in divorce to minimize tax burdens.
In addition to alimony, other vital areas with considerable tax implications are the division of individual retirement accounts (IRAs) and other retirement assets, childcare costs and selling your primary residences. Taking the time to consider each step can help decrease the tax burden in the long run.