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Family law: Can I minimize my post-divorce taxes?

| Jul 17, 2019 | Family Law |

It is not uncommon for a person to pay spousal support to his or her ex-spouse after a divorce. Indeed, spousal support is very important to the financial security of a spouse who either earned less or stayed home to care for children. Unfortunately, recent changes to the tax laws affected family law and created a situation where payers might end up paying less while receiving fewer tax benefits. Those tax benefits can be found elsewhere in certain situations.

A New York couple who receives significant gains from investments may already be familiar with the associated tax rates. Gains of $39,475 or less are not taxed at all, and gains from that amount up to $200,000 are only taxed at 15%. Rather than take on monthly alimony payments and the associated taxes, a couple may agree to a lump sum alimony paid by the investment gains.

Another effective way to minimize post-divorce taxes is through smart decisions made during property division. For example, a couple who has significant retirement assets might choose to give more of those savings to the alimony recipient. In doing so, he or she may agree to lower monthly spousal support payments. These couples consider the extra retirement savings as a form of partial alimony.

Taxes are a valid concern for people in New York, especially since many people are worried about what their finances will look like after a divorce. However, alimony was never the only family law option for minimizing post-divorce taxes. Couples may want to explore other options when divorcing, including making tax-conscious decisions during property division.

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