It is important to consider taxes when facing divorce

| Apr 6, 2021 | Divorce |

When someone in Oakland County is facing a divorce, he or she will need to keep in mind that there are several tax consequences which could mean that they will have pay more in federal income taxes when the process is over.

Someone who is preparing for a Michigan divorce will want to be mindful of these consequences so as to minimize them or at least make appropriate financial plans.

Finalizing a divorce has immediate tax consequences

For example, after a person finalizes her divorce, she will not be able to file her federal income taxes “married, filing jointly”, meaning she may lose the benefit of combining many important tax deductions and credits. If she has custody of minor children, she should consider whether “head of household” status is a means of saving money on taxes.

On a related point, if they do have children in common, Detroit couples should remember that only one parent can claim each child on his taxes.

By default, the parent who cares for the children most of the time gets the tax deductions unless he formally signs over that privilege to the other parent. Parents will want to make sure to negotiate who gets to claim the children on their taxes.

A complicated property division can also create tax issues

Ordinarily, most investments do get taxes on the amount of profit a person makes from the sale of the investment.

Generally speaking, transfers of property during the division process do not create so-called taxable capital gains at the time of the divorce. Couples should be aware, though, that if they later want to sell their property, they may have to do subject to a significant tax.