Tax Implications of Tennessee Divorce and Support

Facing a divorce? Memphis divorce attorneys can explain the tax implications of divorce and support. It’s important to have a thorough understanding of how post-divorce taxes may impact your financial situation. Tax implications may impact your support order, marital home, and other assets such as a 401(k), stocks and bonds, and more.

Every divorce is different. Your case has unique factors that need to be considered when evaluating how you might handle certain legal and financial situations. You deserve to have an attorney who will look out for your best interests.

The Impact of Child & Spousal Support on Taxes

For the most part, assets transferred between you and your spouse are not taxable, which is good news for divorcing couples concerned about post-divorce taxes. However, there are circumstances in which you may be taxed. For instance, spousal support (also known as alimony) could be taxable because it is generally considered to be income.

If a spouse also receives child support, this and the spousal support could be taxable. An exception to this would be if the court orders otherwise. However, if only child support is paid, neither the payment of the support or the receipt of the support will be taxed.

Tax Consequences of Selling the Marital Home

Another important post-divorce tax issue that needs to be considered is the house if it is jointly owned. If the marital home is sold, the proceeds are divided either right away or sometime in the future. That typically is the easiest way to handle the situation.

Sometimes, however, the marital home may have special significance to one spouse, or he or she may wish to stay in the home for another reason, such as if the couple has children they do not wish to move from the area. If this is the case, the spouse who stays in the home may buy his or her ex-spouse’s interest in the house.

If the house is sold, the spouses can exclude up to $250,000 from the capital gains tax. This is provided that they have lived in the house for at least two of the last five years. If you are divorced, though, you may use the continued ownership of the house by your ex – if he or she stayed in the house, of course – to qualify. If you are unsure how this affects you, talk to your lawyer.

One of the best ways to avoid getting stuck with property transfer taxes is to sell the house before you get divorced. This can help avoid problems down the road, such as if one spouse gets stuck paying any applicable fees associated with the sale.

How Divorce May Impact Other Assets

Items that appreciate, such as stocks and bonds, could have tax consequences in the way of capital gains taxes. Depending on how the assets are split up in the divorce agreement, one spouse may buy the other spouse’s share of the asset.

If you have a 401(k), your ex-spouse may be entitled to some of it. The courts may draft what is known as a QDRO, which names another person a recipient of the assets in the 401(k). Any assets that are removed due to the QDRO, though, will not be subject to the early withdrawal federal income tax fee.

To learn more, see Divorce and Taxes | TN Divorce Law & Tax Resources.

Seeking Help from Memphis Divorce Attorneys

As if divorce isn’t stressful enough, you may also have concerns with post-divorce taxes. This can make your situation more complicated. The best way to understand all tax implications of a divorce and support is to seek legal counsel.

Speak to a divorce attorney from the Miles Mason Family Law Group at 1-901-683-1850 as soon as possible to have your questions answered. Meanwhile, you can prepare yourself by downloading our FREE eBook, which explains seven steps to planning a divorce. This can help you come to your consultation ready with questions to ask yourMemphis divorce attorney.