Recent Tax Changes that can Affect Divorce

 Posted on March 20, 2013 in Divorce

In order to remove the threat of the fiscal cliff in the beginning of 2013, Congress enacted the American Taxpayer Relief Act.  This new legislation stopped tax increases for the middle class as well as budget cuts to important programs.  While overall this is good news, it could impact your divorce regarding how alimony affects your income and the amount of taxes levied against split property.

Spousal support is different from child support it is usually declared by the receiver and deducted by the payer.  This is important to know when reaching a divorce settlement how these payments can result in more taxes.  Structuring your payments can result in lower taxes and ultimately save you money.  Sometimes it is more beneficial to take a lump sum payment instead of monthly checks because they are non-taxable, but you should make sure that you can maintain your standard of living this way.

Division of property should also be monitored given new tax implications of ATRA.  There is currently a 3.8% Medicare surtax on capital gains, dividends and miscellaneous investment income if it exceeds $200,000 for a single filer.  Concerns like this should guide the agreement you reach with your ex to make sure you aren't on the hook for higher taxes.  This is just the tip of the iceberg for capital gains taxes.

Tax filers that fall into the new 39.6% income bracket can expect even more capital gains taxes.  These taxes have seen increases from 15% last year to 20% this year, which doesn't include the 3.8% surtax or state level capital gains taxes.  When considering the heavy taxes levied against investments, it may be more beneficial to negotiate for a different asset.

Another way to save money and time during a divorce is to have a divorce lawyer who can negotiate before the trial.  Finding the common ground early can make a lengthy, contested divorce turn into an easier experience for your whole family by hashing out custody, finances, and other goals.  Contact an experienced divorce attorney in Austin who has the background to negotiate and litigate depending on your needs.