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Tax Consequences of Your Divorce Agreement

While dealing with your divorce, tax season might seem like an unpleasant, unrelated matter. However, your divorce terms can have a substantial effect on the taxes you owe in the year you divorce and in subsequent years.

Keep in mind these tax implications when negotiating terms of your divorce settlement:

  • Court-ordered spousal support The IRS treats spousal support like income. As a result, you are entitled to deduct spousal support you pay to your spouse. Conversely, you must report the amount of spousal support you receive as taxable income, unless the court orders otherwise.
  • Voluntary payments to your spouse The IRS does not recognize an informal agreement for spousal support. Therefore, you cannot claim a tax deduction of money you voluntarily give to your spouse that is not ordered by the court.
  • Child support You do not owe taxes on child support you receive. If you pay child support, you cannot count the money as a deduction.
  • Exemptions for dependents Unless the parents agree otherwise, the custodial parent usually is entitled to claim the dependent exemption. However, you are allowed to negotiate this benefit, as long as both parties satisfy the IRS rules for claiming the exemption. For instance, you might decide that you claim the dependent exemption in odd years and the other parent claims the exemption in even years. If you stand to gain the most advantage, you might exchange an asset in return for your right to claim the exemption in all years.
  • Head of Household status — In custodial arrangements with equal or near equal parenting time, the parties should also designate who will claim the head of household status. It can be negotiated in a similar manner as the exemptions are negotiated.
  • Property division Because the transfer of marital property occurred between spouses, the IRS does not recognize gains or losses resulting from division of assets associated with divorce. There are some exceptions to this rule a lawyer can explain to you.
  • Divorce of same-sex couples Since the Supreme Court overturned the Defense of Marriage Act (DOMA) last summer, same-sex marriage and divorce in Minnesota is now subject to the same IRS rules and benefits as heterosexual nuptials and dissolutions in the state.

Divorce is tough enough. Do not pay the IRS more than you owe. An experienced St. Paul family law attorney can strategize divorce terms that do not unnecessarily negatively affect your tax liability.

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  • "Tori had a thorough understanding of my situation and made excellent recommendations to resolve my concerns. She was persistent on communication and handled everything in a very timely manner. I would definitely hire her again in the future if needed." - M.K.

  • "With Appelhof, Pfeifer & Hart, P.A., it is like having a family physician. They are all knowledgeable, thorough, comforting, and the only call I need to make for all my legal needs for many years to come. No matter what the matter, I totally trust their advice and commitment to me and my family." - J.N.

  • "Mary from APH Law helped me thru a difficult divorce. She and the entire staff was there for me every step of the way helping me on what to do next. They listened to what I wanted and helped me achieve what matter the most to me in the divorce settlement." - Dana C.

  • "I chose APH after my initial consultation with Mary. I felt my best interest would be represented. The entire process went excellent, the attorneys and staff communicated effectively and efficiently with me throughout the process as they needed to. Being new to the legal process and verbiage, they walked me and talked me through the next steps and the jargon, I felt completely comfortable and represented. I hope I never have to use legal services again but if I do I will call Mary at APH Law and know that I will be taken care of." - Jeff M.

  • "Divorce is a time of emotion and stress. Mary Pfeifer , My lawyer was professional and compassionate. She was very informative through the process. Her insight helped me in my decisions. She worked hard to obtain a settlement which was fair to both parties. Though, I hope I won't need her help again. It is reassuring to know a good person that is willing to help." - Rod S.

  • "I first came to Ms. Jacquelyn Lutz of Appelhof, Pfeifer and Hart in October of 2016. It was definitely the worst time in my life and she compassionately spoke with me about my options. Ms. Lutz thoroughly explained the laws, statutes, process and what to expect going forward. What was supposed to be one case, turned into three intricate cases that took a huge toll on me and my family. Ms. Lutz represented me in court on all three cases with a vast knowledge of the laws and how to proceed accordingly. During all three cases she kept me informed, calm, gave me resources to utilize, and (most important) gave me a realistic view of what may come next. Ms. Lutz knew each case required a great deal of knowledge and creative thinking on how to legally proceed forward with each case. My family and friends are forever grateful for the amazing representation by Ms. Lutz. I highly recommend Ms. Lutz for anyone needing or considering superb representation for any kind of family law. " - M.H.

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