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Taxes are important consideration in divorce

Who gets which assets, who gets custody of the kids, who gets the house? These are just a few of the many decisions that the California couple filing for divorce must make. In making these important decisions, one will want to keep in mind the tax implications of each one.

When it comes to filing taxes, the individual's marital status on December 31 is the status under which they must be filed. This means that if the divorce has been finalized, the individual will file as either head of household or single. If one is filing as head of household, he or she will want to review the specific criteria to verify eligibility.

Even after child custody decisions have been made, there still may be some uncertainty as to who should claim the children as dependents for tax purposes. Unless otherwise specified in the divorce agreement, the custodial parent is usually the one who claims the children. In some instances, the couple may agree to rotating the exemption every other year or to some other arrangement.

One other area to keep in mind is investments. Many times, retirement accounts are affected in a divorce. These accounts are generally not taxed until they are distributed. If a retirement account, or a portion of it, is to be transferred from one individual to the other, it is important to transfer it in a manner that will retain its tax free status.

Taxes are an important consideration when it comes to divorce. As the California couple is finalizing their property settlement and other important details, they will want to keep this in mind. Experienced legal counsel can help one determine what is in his or her best interest.

Source: wtop.com, "5 things women should know about taxes after divorce", Dawn Doebler, March 22, 2017

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