Divorce can be costly, especially for high-asset couples. This is not about the cost of hiring an attorney or paying court fees, it is about the costs on the long-end: the tax effects of certain decisions couples make when finalizing their divorce. To avoid some of this, and to understand the issues more fully, it is important to work with an experienced attorney. A recent Huffington Post article focused on the tax effects of alimony and child support for couples.
There is any number of financial considerations that a couple must take into account when they are filing for divorce in Minnesota. From the effect of dividing certain assets such as a house or vacation property, to a person's annual filing status, divorce can be economically impactful. To better understand these issues and the effect that they can have on a person's finances, it is very important to work to understand the legal concepts related to family law.
One of the more common issues is the effect that certain payments such as child support and spousal maintenance will have on a person's taxes. Child support is not deductible by the person making the payments. However, there are certain tax credits that may be helpful. These include the American Opportunity Tax Credit and the Tuition and Fees Deduction which may be utilized if a person is paying for his or her child's college tuition.
Unlike child support, alimony is deductible by the spouse making the payments as long as the payments meet certain criteria. This is a very important consideration as it could impact a person's taxes. While all of these issues are important, they are really only a few of many tax consequences to take into account. However, if a couple works with quality counsel all of these questions can be addressed.
Source: The Huffington Post, "Divorce Tax Tips: Five Most Common Tax Questions," Joseph E. Cordell, Jan. 29, 2013
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