Colorado Springs area divorce settlements and their related support orders can affect a lot more than just the present financial status of a family; they can also have a long-term impact on personal income tax liabilities. Few Colorado Springs couples really consider this when they first consult with an attorney, but there are some very specific questions that must be answered before the final papers are signed. Remember, tax considerations also play into the determination of who gets the marital home and the investment accounts.
I often hear similar concerns from people who are seeking a divorce, so I will attempt to answer some of them here.
How do we determine the value of what we own?
Start by compiling a list of assets and attach a value to them as of the date of separation. Revalue them again at the date of the trial, and plan on revaluing those several more times during divorce proceedings. Remember that capital gains tax can erode up to 25% of the value of certain investments. Any jointly owned businesses will need to be valued both on an historical basis as well as on projected future revenues.
What is the Innocent Spouse Rule?
This is a protection that is granted to relieve a spouse from being responsible for the tax bill of a former spouse, as long as certain conditions are met. There must have been a joint return and the “innocent spouse” was unaware of any understatements or errors in calculating the tax return.
How is child support treated for the sake of income tax?
Child support is not tax deductible for the payer, nor should it be reported as income by the recipient. However, parents often take turns claiming the children as dependents. One stipulation that should be included in the order is that the support-obligated spouse be current in their payments in order to take the tax exemption.
Financial support, the division of assets and other income tax issues can complicate the divorce process and your financial future. A local divorce lawyer in Colorado Springs can help you prepare for the complex tax issues that may lie ahead.