Virtually no one wants to come out of a divorce with their finances in shambles, but with so many different factors to consider, figuring out what decisions are most appropriate can be quite a task. Certain assets split during a divorce can have tax implications or additional hidden costs associated with them. Even some decisions that might initially seem free of tax issues can have profound influences.
Most people in New York know that keeping the house means taking over property tax responsibilities, and decisions concerning what to do with a marital home typically involve taking into account whether either party can make those types of payments. But physical assets are not the only taxable factor to consider. Alimony payments are taxable and must be claimed on tax returns. This applies to both the person paying tax -- who can claim it as a deduction -- and the individual receiving -- who will be taxed on it as income.
Additionally, while child support payments are not taxed, both parents cannot claim the kids on their tax returns. If the IRS receives two tax returns with the same children listed on both, the returns will be subjected to an audit. Consider addressing who gets to claim the kids in the divorce settlement. Much of the time, which parent claims the children is based on the division of parenting time, although some parents do choose to alternate years.
It can be understandably easy to overlook the future financial implications of some decisions, but failing to give them adequate consideration can also be detrimental to a person's future stability. For many people, divorce is something much different than an ending. Divorce can be a time to start over in New York, and securing the most stable financial foundation can start in divorce.
Source: The Huffington Post, "Divorce and Money", Terry Savage, March 18, 2015