One issue of prominence in a high-asset divorce is not just divorce legal issues such as time-sharing, child support, property division and alimony. Tax issues also play a role in many high-asset divorces in the Boca Raton area. The following are some tax issues people going through a high-asset divorce will want to keep in mind during the divorce process.
Tax issues in property division
When dividing assets in a divorce, it is important to look beyond the fair market value of the assets, but also the tax implications that follow certain assets you may be looking to keep. For example, if you are awarded a traditional IRA, the funds in this account have not yet been taxed. This means that, when the spouse keeping the IRA makes withdrawals, that spouse will be paying taxes on those withdrawals. Roth IRAs, on the other hand, have already been taxed, making withdrawals tax-free.
Time Sharing and tax credits
The parent who claims their child as a dependent post-divorce enjoys certain tax benefits unless their income is too high. This includes the child-tax credit, educational credit and child-care credit, among others. In addition, while currently the “dependency exemption” that was in effect prior to 2018 is set at $0, the $4,000 dependency exemption is set to return in 2026.
Keep taxes in mind when making decisions on divorce legal issues
As this shows, people going through a high-asset divorce will want to keep tax issues in mind when it comes to making decisions on divorce legal issues such as time-sharing and property division. Keep in mind that this is only a brief overview of this topic, and it does not address all tax issues that may be present in a divorce. For further information on taxes and divorce, it can help to seek legal assistance so you can better understand your rights and options.