Divvying Up? Check Taxes
July 03, 2009
By ANNA PRIOR June 28, 2009 The Wall Street
Journal
When
divvying up assets in a divorce, make sure you consider what they would be
worth after taxes. That's particularly important in community-property states,
which mandate a 50/50 split.
"It's
important to know that what you do has tax consequences for both parties,"
says Jackie Perlman, a tax analyst with the Tax Institute at H&R Block.
Take
a couple that has an investment portfolio with stock and taxable bond funds
that appear to have equal value, and one spouse gets the stock funds and the other
the bond funds. Factor in capital gains or the fact that interest on bonds is
fully taxable, and the values of those funds don't hold equal weight.
"All
of a sudden, you don't have apples to apples anymore," says Amy Barrett, a
certified divorce financial analyst in Rockford, Ill.
Another
tax issue could arise when divorcing couples sell their house. If a couple
bought a house a while ago, capital gains from a sale could be large despite
the current housing-market slump.
If
the house is in the name of just one spouse, any gain above $250,000 must be
reported as taxable income, she says. But if the couple sell the house jointly,
they can get a $500,000 tax exclusion. In some cases, Ms. Barrett says, that
could wipe out any taxes owed.
Write to Anna Prior at [email protected]
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