There’s a provocatively titled article that was recently published on Nasdaq’s website, with the premise being that getting divorced can save you money on taxes. Taxes are, of course, one of those confounding financial items that must be factored into your divorce plan, which is why it’s good for you to consult with an accountant as well as your family lawyer as you’re getting your divorce to the finish line. It’s not enough, clearly, to look at one online article and think you have all the answers for your individual financial situation. But let’s take a look at what they say.
The article is titled, “Want to Save on Taxes? Consider a Divorce!” The main idea is encapsulated in this section of the article:
The tax proposal just released by the House Ways and Means Committee on Sept. 13 provides a peek into what the bill may look like in its final form. While there are many tax changes, the most notable include raising income and capital gains tax rates on high earners – especially married couples. Wedded individuals will see the most dramatic tax squeeze, so as a result, getting a divorce could save high-earning couples thousands of dollars or more in taxes.
While that’s not a good reason to get a divorce on its own, of course, this highlights the special considerations that couples must factor in when they have assets of this kind. In what we in the family law practice call a “high-net-worth divorce,” couples are faced with far more complex financial pictures than most couples. In those cases, we typically bring in a financial professional who can help determine the value of certain assets — and if it’s a collaborative case rather than a litigated one, we can creatively negotiate how to best split assets to serve both parties.
The article goes on to acknowledge that the divorce recommendation isn’t all that serious. In fact, one CPA pointed out that there’s a federal regulation noting that the IRS “will disregard a divorce obtained solely to save money on taxes. The couple must recalculate their taxes as if they had stayed married for the entire year, making the couple liable not only for additional taxes but also for interest and penalties. Couples over the threshold may also explore filing taxes separately, but often useful tax deductions and credits are disallowed.”
But there might be strategies that will help one or both parties tax-wise, and there are definitely things you should know about how child support and spousal support money — how it’s counted as income, how it should be reported, and who pays tax on it.
When you work with the Law Office of Lisa A. Vance, we’ll be able to cover some of the basics with you. We’ve been working with clients for long enough to know what fundamental things you should know, but we’ve also been doing this for long enough to know when you need a financial professional to help you out. Regardless of how straightforward or complex your financial situation is, we can help you determine a strategy in your initial consultation and then see it through until your divorce is settled.