What are Some Possible Tax Consequences of Divorce?
By working with a Norfolk divorce attorney in conjunction with your tax accountant, you can be aware of options that minimize the tax consequences of divorce.
Capital gains taxes, income taxes and the tax consequences of alimony are the main factors to consider. Property division often involves the sale of stocks and real estate. By subtracting the original price paid for your asset from the fair market price, you can determine the asset’s capital gain. A stock purchased at $50 that is now worth $75 has a capital gain of $25. The Virginia capital gains tax rates for 2013 are 5.8 percent, and the combined federal and state long-term capital gains rate is 28.5 percent. When you receive property through a settlement that has substantial capital gains compared with property that your spouse receives of equal value but with insignificant capital gains, the distribution may not be fair. As for real estate capital gains, federal capital gains tax allows an exclusion of $250,000 per individual owner on the sale of the home when the couple has lived in the home for two years prior to the sale. For both couples selling a home, the exclusion is $500,000. If selling your home is part of the divorce settlement and the capital gain is over $250,000, you should consider selling the home prior to filing for divorce. As far as income tax, filing jointly allows you to pay less tax and therefore the timing of your divorce can affect your tax filing.
Norfolk family law attorney can help you consider the tax consequences involved with divorce as part of creating your property division settlement.
Darrell M. Harding provides clients with extensive experience acquired from over 20 years of handling divorce cases.