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Don't ignore the tax implications of your divorce agreements

The next tax season is a long way off, so if you're going through a divorce, the tax implications may not be uppermost in your mind. However, an experienced family law attorney will ensure that you consider the impact of the decisions you make on your taxes.

It's always a good idea to consult a tax professional as well as a financial analyst before, during and after your divorce. Following are just some of the issues that could impact your taxes next year and in the future.

First, remember that your filing status will depend on whether you are still legally married on Dec. 31. Therefore, you may want your tax professional to determine what the ballpark difference will be in what you owe (or are owed) next year between filing jointly and as an individual before you set a date for the dissolution.

Look at the tax impact of getting various types of assets when you divide property. For example, are you better off asking for $50,000 in investment assets or cash? You may end up paying a capital gains tax if you take the money in stocks. Determine what kind of assets will cost you less in the long run.

If you and your spouse are going to sell your home, particularly if you're going to make a profit, it's best to do it while you're still filing your taxes jointly. That's because the capital gains exemption is twice as high for married couples as for single people.

If you have kids, your custody as well as spousal and child support agreements will have tax implications. The parent with whom the child is living for more than half the year gets tax advantages such as being able to claim that child as a dependent, receiving an exemption and filing as head of household.

Alimony payments need to be reported by the recipient as income and are deductible by the payer. The same is not true, however, for child support. It's essential that both parties report the same amount of alimony (paid or received) on their taxes.

It's always best when divorcing couples can work together to help ensure that neither of them takes an unnecessary tax hit. However, that's often not the case. Either way, it's best to have experienced legal, financial and tax professionals in your corner to help protect your interests.

Source: Denton Record-Chronicle, "Seven tips for preparing your taxes in a divorce," Tina Orem, July 19, 2017

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