How can you include taxes while dividing assets?

How can you include taxes while dividing assets?

| Aug 23, 2020 | Firm News |

Divorce is financially taxing and emotionally taxing. When it comes to the division of assets, there is a lot to consider. One thing that many people do not consider is how taxes should integrate into negotiations.

Forbes explains that divorcing couples should pay attention to two things for a tax-savvy divorce.

Consider Tax Credits

After a divorce, you may have tax credits that you can claim. For example, if you have custody of the children, then you may be able to claim your children on your taxes. If you have the dependency exemption then you can also claim other tax-related benefits. If you have a tax refund at the time of your divorce, you can also put the refund on the table for negotiation. If you have stocks that lost money, you may also be able to use those to reduce future taxes.

Do Not Ignore Hidden Values

When you split assets, it may be easier to focus on the face value of the assets. The problem with this approach is that the surface does not always tell the entire story. Some assets can hit you hard during tax season. An example of one of these assets might be an IRA. If you have two IRAs worth the same amount of money, you may think it fair to split the two. However, if one is a traditional IRA and the other is not, then the traditional IRA may have unpaid taxes. While the other IRA may have paid its dues, so the spouse with that account does not have to worry about tax debt.