All of the issues you must consider when going through a divorce can be overwhelming. Besides examining custody issues, dividing assets, and determining how property will be divided you will also have to consider tax ramifications that will impact you moving forward.
It is essential to hire an experienced Michigan divorce attorney to help you plan for these tax consequences and to make decisions that will provide you with the most optimum outcome for the future.
Contact Grewal Law PLLC today with questions regarding your divorce and tax ramifications at (888) 211-5798.
Alimony Tax Ramifications
When you are paying or receiving alimony payments, otherwise known as spousal support, in Michigan there are federal tax considerations. A person paying support is able to deduct the amount of the alimony paid only if it meets guidelines outlined by the IRS. The support must be court ordered in order to take the deduction. In addition, the spouse cannot be living together when the payments are made and do not file a joint return. Finally, the payments must not be treated as child support.
On the flip side, if you are the one receiving alimony payments you are required to count the money received as income. The payments do not have tax taken out of them when they are made to you therefore, you must plan accordingly. It is important to determine your estimated tax to help you plan for the year.
Child Support & Taxes
Even though paid alimony is deductible, the payment of child support cannot be deducted by the person paying the support. So, if you are paying child support to your former spouse you will not gain any tax benefit from making the payments.
As a person receiving child support, you do not need to count the payments as income. Despite the fact that alimony is taxable, child support is not taxed under federal law.
Division of Assets
When property is divided in a divorce there are not usually immediate tax consequences. However, if a piece of property you receive in a divorce is a source of income where rent or other revenue is generated from it then you will have to pay taxes on this amount. In addition, if you sell a piece of property down the road that generates income or that is a second property, you could be required to pay capital gains tax. To better understand any federal taxes related to property division you need an experienced Michigan divorce attorney.
Other things that could have an impact on your taxes include the division of investments. These include pensions, retirement accounts, stocks, and IRAs which could result in major tax consequences for you. Let our team work with you to determine how the transfer of a particular asset could impact your taxes. We will review any penalties you may be responsible for paying and will help you plan accordingly for the future.
Experienced Michigan Divorce Lawyer to Help Understand Tax Ramifications
All of the changes brought on by a divorce are often difficult to face. While your family is in this state of transition it can be tough to think about taxes and the ramifications a divorce will have on your finances. You need a Michigan divorce attorney to help you consider all of these changes. We will go over all the possible things you need to consider for both state and federal taxes to help you determine how these changes will impact your overall tax liability.
Do not wait, call Grewal Law PLLC now at (888) 211-5798.