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Attorney Discusses Tax Issues in a Delaware County Divorce

Trusted Legal Guidance in Delaware County Divorce Tax Matters

Divorce is not only emotionally draining but is also a complicated legal process that can significantly impact your finances. Among many other issues, a professional must thoroughly evaluate the tax consequences of divorce for either or both parties. It is essential to have an attorney with experience in complex financial and tax matters.

The Law Offices of Sheryl R. Rentz, P.C. has represented clients in divorce and family law matters since 1992. We have skillfully handled many complex, high-asset divorces. Our experienced Delaware County divorce lawyer can review your divorce’s financial and legal aspects and explain how state and federal tax requirements could impact your future.

Call us at (610) 645-0100 to learn more.

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What Are the Tax Implications of Divorce in Pennsylvania?

Tax laws surrounding divorce in Pennsylvania are particularly complex. The circumstances of a divorce can impact tax brackets, tax shelters, tax requirements, and tax write-offs. Divorce may affect your taxes in areas including:

  • Filing status: If your divorce is not finalized by December 31, you are still married for tax purposes and can file jointly. It may be advantageous to complete your divorce after the New Year and time your divorce to optimize tax deductions. Once the final decree is issued, your filing status changes. Unlike other states, Pennsylvania does not have a legal separation. Therefore, it cannot be used as an exception for state or federal taxes if your divorce was finalized in the middle of the year.
  • Joint or separate filing: Although you may choose to file separately from your spouse before your divorce is finalized, there may be disadvantages to doing so. You will not be entitled to receive earned income credits or education credits. Child credits will be cut in half.
  • Division of assets: The distribution of marital assets can affect your tax liability, depending on how they are divided. If one spouse sold investments to the other, they may be subject to capital gains tax. When real estate, marital debt, or other property is divided or sold between spouses, it can have unique tax implications, which should be reviewed individually with your attorney. Selling or moving away from the marital home can impact your ability to deduct mortgage interest and other real estate benefits. Many non-liquid assets, such as 401ks, stock option plans, retirement plans, and life insurance annuities, have tax consequences when transferred in a divorce.
  • Support payments: Tax requirements changed with the Tax Cuts and Jobs Act. In a divorce, only one parent is able to receive child credits. Alimony is no longer subject to state or federal income tax; neither is it tax-deductible for payors. The same applies to spousal support (paid by one spouse to the other before the divorce is final) and child support. Only one parent can claim a child as a dependent on their taxes. In joint custody situations, the credit may be available to the parent with the higher income.

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How Can You Protect Your Financial Future?

Divorce can have a significant impact on your tax debt and overall financial situation. An in-depth review of your finances and careful consideration of tax implications moving forward is critical in the process. It is better not to rush through a divorce if it means a heavy tax debt in the near future.

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Consult a Proven Delaware County, PA Divorce Lawyer

At the Law Offices of Sheryl R. Rentz, P.C., we have 25 years of experience obtaining positive outcomes for our clients. Our Delaware County family law attorneys have the knowledge and skills to review your situation and advocate for your best interests carefully and effectively.

If you are facing divorce, reach out to us at (610) 645-0100. Let’s see how we can help.

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