Orlando Divorce and Taxes

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Consider Your Taxes in a Divorce

Taxes play a tremendous role in the economic aftermath of divorce. Advance tax planning is critical.

To properly handle questions about your Orlando divorce and taxes, it is important to consult with your trusted CPA or a qualified tax attorney. That should be a part of every divorce. In most divorce cases, it is wise to retain a CPA or tax expert as an explicit part of your legal team.

At Kramer Law, our attorneys are not CPAs nor do we specialize in taxation matters. Accordingly, we do not provide our clients with specific tax guidance or advice, nor will most family law attorneys.

Speak with an experienced divorce attorney at our firm today.
Call 407-834-4847

From the onset of each case, we will help you understand the importance of preparing for potential tax implications. Below are some general principals to think about as you plan your strategy to deal with Orlando divorce and taxes.

General Tax Considerations in a Florida Divorce

Determining tax consequences before a divorce is finalized is not a judge’s responsibility. Tax obligations fall back on both parties in the divorce.

Florida allows for “equitable distribution” of marital property during divorce. Some property may need to be tax affected (or the value of an item reduced) to reflect tax consequence in the future. The goal is to seek the greatest value and lowest tax implication during the valuation process, even if a partition is required on some assets.

Florida Alimony and Taxes

Florida alimony or spousal support is considered taxable income, and can have significant tax consequences on one or both parties in a divorce. Generally, the person paying alimony can deduct the amount paid from his or her taxes. The person on the receiving end of the alimony payment will need to state the amount of alimony received as income.

The type of alimony will also affect the tax implications. In fact, obtaining good tax advice during divorce proceedings is imperative when deciding how to structure alimony properly.

Taxes and the Division of Florida Property

The following assets considered in equitable distribution have potential tax consequences in a Florida divorce:

  • Redemption of stocks and the transfer of certain stock options;
  • Brokerage accounts;
  • Business interests;
  • Retirement accounts. It is important that the terms of the divorce decree will avoid a significant tax penalty by rolling retirement funds into a retirement plan for the receiving party. Other retirement funds may require a qualified domestic relations order, or QDRO, for the proper transfer of retirement money;
  • Military pension and retirement; Military pensions have special laws which must be followed explicitly in order to retain benefits;
  • Capital gains taxes upon sale of certain marital property, such as the marital residence, rental property or other real estate.

Child Support Is Not Taxable After Divorce

Child support is not considered a taxable income or expense in Florida. However, some parents who pay child support may be able to include their children as dependents as explained below.

Child Tax Exemptions after Divorce

An important tax issue is the matter of child tax exemptions in a divorce. This tax deduction reflects expenses related to dependent children, and reduces that parent’s taxable income. Each parent is eligible to file for the child dependency tax credit, but only one parent per year can claim his or her child when filing.

This matter is best resolved early in a divorce case, where agreement is made between parents as to which parent will claim the child tax exemption. A parent who is considered the custodial parent (has the majority amount of time sharing) is generally allowed to claim a tax exemption for each child. However, parents may want to agree otherwise, such as alternating years each parent claims the dependency tax exemption when filing income taxes.

Kramer Law can assist in these negotiations and clarify the agreement in writing. Each party is responsible for working with their CPA or qualified tax professional to properly claim his or her children (or revoke the claim) on their tax returns.

Understanding the Realities of Orlando Divorce and Taxes

Often a divorcing couple is overwhelmed by the emotional aspects of a divorce. The two parties may not even discuss the issues of divorce and taxes, much less be thinking about them. The rules set forth by the IRS regarding divorce and taxes are certainly complicated, and the issue of taxes—if not handled wisely—can be a financial disaster.

The best thing to do when facing divorce is to get help from an accredited tax expert. These tax issues herein are a starting point for tax planning discussions with your trusted CPA, tax lawyer or financial planner, and an experienced Orlando divorce attorney.

There is No One Size Fits All Approach to Divorce

Our attorneys will work with you to ensure you understand all of the implications, even in the most complex or high asset divorce cases. We work closely with your tax professional as needed to provide an exhaustive and orderly division of marital assets with the least tax burden. As appropriate we may connect you with a forensic accountant or financial planner.

Our legal team is also offers complete and compassionate legal guidance in even the simplest divorce proceedings. When you need a law firm who knows you and will go to bat for you, we want to be the one law firm you call.

Get in touch with Kramer Law today to speak with an Orlando divorce attorney who will walk with you from the onset of the divorce to the conclusion, whether in mediation or in front of a judge.

Speak with an experienced divorce lawyer at our firm today.
Call 407-834-4847

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Altamonte Springs Office
999 Douglas Avenue
Suite 3333
Altamonte Springs, FL 32714
Downtown Orlando Office
37 N. Orange Avenue
Suite 500b
Orlando, FL 32801
CALL (407) 834-4847