Tax laws can make dividing assets difficult in a high asset divorce, further complicating the already complex task. Understanding this impact in advance can save you time and money.
Here is a broad look at how current tax laws can your decisions when dividing marital property during a high net worth divorce.
Overview of Florida’s Taxes Related to Divorce
The Sunshine State does not impose a personal income tax. This is a huge relief to people going through a divorce.
However, Florida does have specific laws that can impact property distribution in divorce cases. For instance, property appreciation and passive income are not necessarily considered marital assets. This means high earners must be cautious during divorce. They must work extra hard to ensure they receive an equitable share of their assets.
No matter the situation, tax law is complicated, and there are always exceptions within exceptions. Your best bet is to hire an experienced attorney to help you navigate this red tape in your divorce. Russell S. Hershkowitz, L.L.C. is here to help guide you through this process.
The Impact of Taxes on Property Division in Florida Divorce
Dividing property such as real estate, business interests, investments, and retirement accounts can have significant tax consequences. Either spouse can feel a long-term impact.
For example, if one spouse receives a large amount of liquid assets, they may face a higher tax burden. Perhaps one spouse keeps the home, but if they decide to sell, there could be tax consequences that make the sale unprofitable.
When creating your divorce settlement, it's important to work with experienced professionals. Accountants and attorneys understand the complexities of property division in a high asset divorce. Working diligently, they can help minimize tax liabilities.
Strategies for Minimizing Tax Liability During a High Asset Divorce in Florida
- Negotiate for a fair split of assets that are not taxable, such as physical property or investments that are not subject to capital gains tax.
- Carefully plan around spousal support and child support payments. They can sometimes be deductible for the paying spouse and taxable for the recipient. You need to prepare, so neither party is unfairly burdened.
Dealing with Business Assets and Taxes During a High Asset Divorce in Florida
Get a clear understanding of the value of your business assets, including any intellectual property, stocks, or other investments. Once you have an idea of your business’s worth, you can work with your attorneys and accountants to determine the best way to fairly divide these assets.
As always, remain aware of the tax implications of your divorce. Capital gains and losses can affect your overall financial situation.
The Role of Taxes in Alimony & Child Support Payments in a Florida Divorce
Both alimony and child support payments are subject to taxation. Generally, the paying spouse is responsible for paying taxes on those payments, and the receiving spouse does not pay taxes on them.
However, the tax implications can vary based on the terms of the divorce settlement. For example, if the alimony payments are structured as a lump sum, the paying spouse may be able to deduct that amount from their taxes, but the receiving spouse must pay taxes on the full sum.
Work closely with your attorney to create a fair alimony system that does not unduly affect one spouse.
How the Timing of Your Divorce Can Impact Your Taxes
If you finalize your divorce before December 31st of a given year, you'll file as unmarried for that entire year. However, if you finalize your divorce on January 1st or later of the following year, you'll file as married for the entire previous year. Small details like these can have a significant impact on your tax liability.
Timing can also impact spousal support payments, property division, and overall financial planning for both parties. Work closely with your attorney and financial advisor to determine the best timing for your circumstances.
Our firm understands the complexities of taxes and how they can impact a divorce. To consult with our team, call our office at (407) 753-4111 or contact us online.