Divorce Tax Consulting

Post-2018 divorces: alimony is not deductible for the payor and not taxable to the recipient. Pre-2019 divorces: alimony is deductible for the payor and taxable to the recipient. This is a massive change. Many alimony payers were surprised to learn they lost a deduction they expected. When negotiating divorce settlements post-2018, the tax treatment shifts more burden to the payor. If your divorce occurred pre-2019, alimony remains deductible under the old rules. We help clients understand the tax impact of alimony agreements before they're finalized. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

A QDRO is a Qualified Domestic Relations Order. It's a court order that splits a 401k, IRA, or pension between spouses in divorce without triggering immediate income tax or early withdrawal penalties. Without a QDRO, transferring retirement accounts is taxable. A QDRO must be drafted carefully and approved by the plan administrator before distribution. We coordinate with your attorney to ensure the QDRO is proper. Missing this step costs thousands in taxes and penalties. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

401k and pension splits require a QDRO (described above). IRAs can be transferred by court order directly to a new IRA in the spouse's name. The transfer is tax-free if done correctly. Do not take a distribution and try to roll it over yourself; that triggers taxes immediately. For older spouses taking early distributions, penalties can be waived if the divorce settlement allows it. We review your retirement account statements and coordinate with attorneys to ensure proper titling and tax treatment. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

If you have capital loss carryovers or tax credits (like education credits), they belong to whoever earned them unless you agree otherwise. A capital loss from a business you ran is your loss to claim, not jointly. Some couples negotiate credit allocation. For example, if one spouse earned $50,000 in education, both might agree to split education credits 50/50. These are negotiable items in settlement, but they must be clearly documented. We help value the tax impact of carryover allocation. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

Innocent spouse relief protects you from joint and several liability on a tax debt if your spouse underreported income or overstated deductions without your knowledge. You must show you didn't know of the error and that holding you jointly liable is inequitable. To qualify, you typically must not have benefited from the underpayment. Relief is not automatic. We gather evidence and file Form 8857 with the IRS within certain time windows. California and Georgia divorce courts sometimes refer cases to us for innocent spouse analysis. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

A lifestyle audit occurs when the IRS suspects hidden income based on spending patterns. If you live in a $2 million home but report $80,000 income, auditors notice the gap. In divorce, opposing counsel sometimes hire forensic accountants to uncover hidden income. We reverse-engineer spending to estimate actual income and identify discrepancies. Common hiding spots: cash business income, cryptocurrency gains, and side businesses not reported. If you're concerned about a hidden income search, we can conduct a proactive review before litigation. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

Texas is community property: assets acquired during marriage (except gifts or inheritance) are owned 50/50 regardless of whose name is on the title. Division is presumed equal unless there's a reason to depart. Florida is equitable distribution: assets are divided fairly but not necessarily equally. In Texas, a home bought during marriage is split 50/50 by default. In Florida, it might be split 60/40 based on income, need, and other factors. Tax planning is different: in Texas, community property can be divided more predictably for tax basis purposes. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

The home sale triggers capital gains tax unless you exclude $250,000 per person ($500,000 if married filing jointly) of gain. In divorce, if one spouse keeps the home and later sells, they get the $250,000 exclusion as long as they lived there and owned it two of the past five years before sale. If the home is transferred to the other spouse as part of settlement, no gain is recognized at transfer (tax-free). The receiving spouse gets a new ownership clock. We run the numbers to show couples how timing the home sale affects taxes. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

Many excellent family law attorneys don't specialize in taxes. They negotiate settlements that look fair but have hidden tax costs. We coordinate with your attorney: they handle custody, alimony, and property division; we identify the tax impact of each option. Before settlement is final, have a tax advisor review it. The cost of a one-hour review (roughly $300 to $500) often saves thousands. We commonly flag situations where the settlement allocation saves one spouse' $10,000+ in taxes with simple tweaks. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

Generally, the custodial parent (who has the child 50% or more of the year) claims the exemption and the child credit. The non-custodial parent cannot claim dependents unless they have a signed Form 8332 from the custodial parent giving up the exemption for that year. Many divorced parents share the exemption in alternating years (one parent claims even years, one claims odd years) with signed releases. This is negotiable. We help couples structure the allocation to maximize household tax benefits. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.

If you file jointly and get a refund, both spouses have a claim on it. If taxes are owed, both are jointly liable. Any refund should be addressed in the divorce agreement: does the payor get credit for estimated payments made during the year? If one spouse overpaid through withholding, they might demand a refund allocation. For the year of divorce, a filing status must be chosen (married filing separately is rarely good; most couples file jointly if the divorce is finalized after 12/31). We advise on optimal year-of-divorce tax strategy. Every client situation is different, so call (239) 441-2005 to review your specific facts before acting on this guidance.