Some Taxation Practices to Remember When Divorcing
A couple who has been legally separated but does not have a court decree is not considered to be legally separated for tax purposes.
Divorcing parties should have financial plans for four major areas of concern: alimony, child custody, property settlement, and child support. These areas are related to the income tax consequences of both parties. Problems can be created if the income tax responsibilities between alimony (deductible by payor, taxable to recipient) and child support (neither deductible nor taxable) are not readily identified. Also, palimony payments to a live-in partner are not considered alimony and therefore are subject to a gift tax.
Distributions made to an employee who has retirement plans are taxable to said employee; when these distributions are shared with an ex-domestic partner, they are taxable to him or her. In California, a state practicing community property between spouses, the Internal Revenue Service has ruled that a participant employee is not taxed on the spouse’s interest.
We at Alexander & Associates, who serve clients in Lewisville, Denton, and Frisco in North Texas, will ensure that your legal rights are upheld and that your interests are prioritized if you employ our services in handling your divorce case. Call our offices today at (972) 420-6560.