McWilliams Mediation: Knowledgeable

Knowledgeable

Tax Issues

When making decisions regarding your Dissolution, it is important to consider the tax ramifications of those decisions because it is a way to save (or spend) money.  You might remember that:

  1. Alimony/Maintenance is usually deductible to the person paying it and taxed to the person receiving it, if the IRS requirements found in IRC §71 are met.
  2. The transfer of assets pursuant to a Dissolution of Marriage is not generally a taxable event, if you follow the IRS rules.  However, in dividing the assets you may want to consider which of your assets contain after-tax dollars, such as the equity in your home or your checking account, and which assets contain pre-tax dollars, such as your retirement accounts.  Use caution when you are calculating the worth of your marital estate and the division of those assets to make certain that the division is fair to both parties.
  3. The IRS Code governs which parent can claim head of household for one or more of the children.  Generally, a child must live with one parent more than 50% of the time, and this cannot be traded.
  4. The dependency exemptions can be divided between parents, and it is worth actually doing the calculations to be certain that you save as much money as possible.