Tax Considerations In Marital Property Division
New York maintains a court system in order to peacefully resolve conflicts among its citizens. One of the most popular uses of this conflict resolution system is divorce.
Divorce tax considerations have such a profound effect on divorcing parties that they can dictate many of the major decisions that are made in the course of the process. I should know ? I have advised many clients of means as part of my high asset divorce practice.
I am Robert G. Smith, a New York divorce lawyer for more than 40 years. I bring experience and insight that result in valuable counsel for my clients. My Robert G. Smith, PLLC, law firm has your back, so you do not make a mistake that lands you in trouble with the Internal Revenue Service.
Aggressive Advocacy That Makes A Difference For Tax Issues During Divorce
I have helped to unravel more than a few knotty tax problems. Some of these tax issues may include:
- Spousal maintenance: Each dollar of spousal maintenance paid by a moneyed spouse who is in a higher income tax bracket than a nonmonied spouse can reduce the payor’s taxes by more than they increase the recipient’s taxes, provided that you comply with the IRC rules and regulations.
- The dependency exemption: You are entitled to take a $3,400 deduction from income for yourself and each of your dependents. The value of that deduction phases out when your income is more than $150,000.
- Property transfers: There is a $250,000 lifetime exclusion on the transfer of marital residence. Further, the transfer of capital assets ? i.e., the marital residence incident to the divorce ? should be clearly identified as a tax-free transaction with a stepped-up basis.
- Filing status: You cannot take the alimony deduction if you and your spouse still reside together. You can, and in most cases, you should file a joint income tax return with your spouse if you are not divorced yet, even if you do not reside together anymore.
- Filing requirements: If your spouse is paying deductible spousal maintenance, the recipient is required to file estimated income tax returns. I will alert you to the importance of consulting with your accountant or tax consultant.
- Reporting requirements: There is no statute of limitations for unreported income. The Schedule C’s or business income tax return, which you or your spouse has filed during the marriage, may be a time bomb or the key to an expedient out-of-court settlement.
- Innocent spouse exception: I can help you understand if you are eligible to obtain the innocent spouse exemption so that you avoid any liability for these potentially costly irregularities.