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How will a divorce affect your taxes?

Going through a divorce is usually a very personal and emotional decision to make; however, it will also have hard-hitting financial implications that it is vital to pay attention to. When going through asset division in a divorce, you should keep in mind the tax consequences of any decisions that you make.

Florida is not a community property state; therefore, it has a legal focus on equitable distribution. This means that courts believe that divorcing spouses should divide property 50-50 in a way that is deemed as fair by all parties involved. Therefore, you are able to engage in a negotiation with your spouse.

What will be the tax implications of my divorce?

The Internal Revenue Code, under section 1041, states that you are able to divide the majority of assets between you and your spouse without facing any taxes as a result. However, you will have to face tax consequences in the long term when you own these assets and investments, therefore, it is important to research the tax consequences of certain assets, such as property and stocks, sooner rather than later.

Taking advantage of tax-free transfers

Before the divorce is finalized, tax-free transfers can occur between you and your spouse. Therefore, it is a good idea to take advantage of this before the divorce becomes finalized.

When going through a divorce, it is vital to conduct research into how to divide assets for long-term economic advantage. Remember to avoid looking at assets only at face value, but instead think about the implications they will have in years to come.

Source: Market Watch, "What Divorce Means For Your Taxes," accessed Nov. 24, 2017

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