Tax Strategies That Could Help Your Divorce Settlement
Interested in finding ways to make your divorce settlement easier? Here are just a few strategies you could consider implementing.
Put alimony in a trust
The changes in how alimony would be taxed opened up some new possibilities for how you’ll deal with alimony. The spouse paying alimony is no longer able to deduct the costs (for divorces finalized in 2019 or later), and the spouse receiving money no longer needs to claim it as income.
This has changed the way couples negotiate alimony agreements. Some particularly wealthy individuals are attempting to get around the change by setting up trusts for former spouses that pay out the income for alimony, which effectively shields them from a tax burden. These are referred to as “grantor trusts.” However, the receiving spouse would be required to pay taxes on the money paid out in this situation.
There are certain situations in which this can be advantageous from a tax perspective. An attorney can provide you with more information.
Selling your home
In most cases, it makes most financial sense for the couple to sell the family home. There are also tax benefits to doing so. If you’re not married you’ll have fewer property tax deductions, which increases the expense of ownership. So selling the home is a way to save on taxes as well as to get more liquid cash.
Negotiate dependent issues
The tax value placed on children was also overhauled in the new tax rules. Children are now a smaller deduction—individual exemptions were eliminated. However, the child tax credit as a whole was doubled. The credit could be given to the lower-earning spouse as a means of negotiation.
For more information about divorce and taxes, contact an experienced Long Island divorce lawyer at Bryan L. Salamone & Associates.