Depending on the types of assets you and your former spouse own, there may be significant tax consequences to dividing them. Whether you are selling your home or business or splitting up retirement accounts, understanding the tax implications of asset division in Frisco will help you make the best decisions possible and create a fair agreement. An experienced property division attorney could help you understand the tax concerns that apply to your situation and refer you to a tax expert, if necessary.
Texas is a community property state, meaning spouses have joint ownership of anything acquired during their marriage, unless they had a prenuptial agreement stating otherwise. Many divorcing couples sell their home and split the proceeds. If they have owned and lived in the home for at least two years and file their taxes jointly, a couple can exclude up to $500,000 of gain from their taxable income. Selling a home before their divorce is finalized allows couples to take the full exclusion. If they sell in the year their divorce goes through, each spouse can usually exclude up to $250,000 of gain.
It is still possible for a couple to benefit from the full $500,000 exclusion should they sell the property in the future if each former spouse owns half of the home and one moves out while the other continues living there. To do this, the divorce decree must specify that one spouse can continue living in the home for a certain period of time. For example, the decree might state that the parent who has the children most of the time should continue living in the home until the youngest child has finished college. To determine the best approach to asset division and avoid substantial tax implications, contact a skilled Frisco attorney.
Specific requirements apply to avoid tax issues when one party transfers retirement savings to their former spouse. To transfer pensions and 401(k)s without penalties, the account holder will need a court order called a Qualified Domestic Relations Order (QDRO). This is not required for an IRA, but the transfer must be included in the divorce decree.
Couples selling non-retirement brokerage accounts or other investments should consider whether they will fall into different tax brackets after divorce. The post-tax total will be different if they intend to divide an account equally, but one person has a higher tax rate. Selling a jointly owned business can also be very complicated, especially if one former spouse purchases the other’s portion. Divorcing couples in this situation should consult with a Frisco lawyer and a tax expert for help preventing tax issues during asset division.
The tax implications of asset division in Frisco divorces can be very complicated. If you and your former spouse want the fairest possible split, it is important to consider the taxes you might owe. Your attorney could either advise you directly on the best strategy or help you find an appropriate tax expert, depending on the complexity of your situation. Towson Law Firm has the experience to guide divorcing couples through their separation while minimizing conflict. Contact us to schedule a consultation today.
Our Law Firm’s approach to your case is based on individual circumstances. Whether it is a simple negotiated settlement, or it requires an aggressive approach, we will protect and defend your best interests.
