Sometimes, a married couple will make the decision to get a divorce. Many financial-related issues can arise in connection to a divorce. Examples of such issues include property division and alimony. What resolutions are ultimately reached in regards to such issues can have a variety of impacts on the parties involved. One type of impact such resolutions can have are tax implications.

How property like investments are divided and how much alimony is given (if alimony is given to one of the parties) in a divorce can impact things like:

  • How much a person can deduct on their taxes (alimony payments can be deducted by the person who pays them).
  • How much income a person has for tax purposes (alimony payments are to be reported as income by the person who receives them).
  • What surtaxes a person is to pay on investment income.

Tax-related issues regarding a divorce can be very complicated. This may be even more the case currently, as recently a new tax law went into place, thus altering the playing field in some aspects. According to an article on the Wall Street Journal's website, a couple of the things the new law could have effects on are the impacts of alimony and the impacts of how investments are divided.

The tax implications of things like property division and alimony can be very impactful. Thus, keeping potential tax implications in mind can be important when a divorcing couple is negotiating a divorce settlement or when a person is deciding what things to fight for in court battles over divorce-related financial issues.

Source: The Wall Street Journal, "New Tax Rules Complicate Divorce," Arden Dale, Jan. 31, 2013