Undergoing a divorce can be financially and emotionally draining. In order to complete the process properly, it’s imperative the former couple consider the tax implications of their decision.
Many assets are divided or sold, so knowing which assets are taxable is important. For example, property that is transferred to one spouse as a result of a divorce is generally not taxable under current IRS rules, according to the New Jersey newspaper, the Star-Ledger. However, these assets must be transferred within six years of the date of the divorce, the newspaper adds.
Assets that are sold to a third party after a divorce may be taxable, however, and each former spouse will be required to pay taxes on the gain of their separate proceeds, the news source explains.
The rules on taxation can become more difficult when a couple has significant assets involved, such as stocks, bonds and other investments, so speaking with a tax preparer can help divorcing spouses better understand how the split will impact their returns. Couples should include a list of all joint accounts and assets, including mortgages, investments and debt.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.