Tax issues to consider during a divorce.

1.) Child support Exemption. Child support is neither deductible, nor taxable. That being said, the dependency exemption can only be used by one parent. Generally, the parent that has primary physical custody, can claim the exemption; or, the parties can alternate the exemption each year.

2.) Spousal Support. Spousal support is deductible to the payer, to the extent that it is included in the gross income of the payee.

3.) Tax-Free Exchanges Between Spouses. Spouses can transfer property amongst each other, without tax consequences. Thus, property received in connection with a divorce will not be taxed.

4.) Pension and Retirement Accounts. Through the appropriate paperwork, funds in retirement accounts can be transferred without tax consequences to either party.

5.) Innocent Spouse Tax Relief. A spouse may be protected if the other spouse has erroneously caused a tax liability without the knowledge or consent of the other spouse.

For more information on tax issues and divorce, you will want to consult with a CPA. For more information regarding a divorce, contact our office at (586) 264-3756.