Gregory S. Johnson, Attorney at Law
Personal Attention, Effective Solutions
Call For Your Free Consultation: 225-341-4690

Tax considerations after a divorce

In the event of a divorce, couples have many financial things to worry about in Louisiana. One issue that may get overlooked but that requires some attention is the tax ramifications. When property is split during the divorce settlement process, couples need to be aware of how some property divisions may be taxed to avoid high taxes or being hit with serious penalties.

The Journal of Accountancy notes Louisiana is a community property state, which means everything is equally divided between each spouse in a divorce. While some property, such as that obtained before the marriage, may be protected against separation, most property will be divided. In addition, there are other financial obligations that may be ordered, such as alimony. Alimony, under tax laws, is considered a liability for the payer and an asset for the payee. The payer can deduct the payments on his or her taxes, but the payee must claim them as income and pay taxes on the total amount received each year.

Market Watch notes some of the more complex situations involve retirement accounts. Typically, it is advised to set up a qualified domestic relations order to ensure the person whose retirement account is being split does not have to pay taxes when the money is removed from the account. The tax burden would then lie with the spouse receiving the money. This can be avoided by rolling it over to an IRA. An IRA being divided is best split into two IRAs instead of removing money to avoid tax liability. If the people are over retirement age, though, tax liabilities may be much lower or money may be removed tax free in some situations. 

 

 

No Comments

Leave a comment
Comment Information
Review Us