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How a divorce in Massachusetts could affect your taxes

Going through a divorce means that you have to make some decisions about alimony, the division of your marital assets and other related issues. In some cases the two of you will be able to agree on these matters, but if not, the court will make those determinations. One thing that you might not consider is how these decisions may affect your taxes. There are consequences for each financial transaction that you make, so it is essential to understand how your taxes could be affected.

Alimony is one of the most overlooked financial transactions that has an effect on your taxes. If you are expecting to pay alimony to your spouse, these payments are deductible. However, if you are seeking alimony, you need to be aware that you have to claim the payments as income. It might be beneficial, if you expect to receive alimony, to plan ahead for taxes that you could owe by saving some it until after you have filed.

When it comes to property division, any transactions that involve you or your spouse selling assets to comply with part of the settlement could be taxable as short- or long-term capital gains. Other transactions that might be subject to taxation include business liabilities and credits, as well as the transfer of real estate. However, other divorce-related matters that involve financial transactions could be taxable as well.

The best way to protect yourself from financial surprises at the end of the year after a divorce is to learn as much as you can. You can view our page about the tax consequences of divorce for more information on these issues.

Source: The law office of Koiles Pratt Family Law Group, "Tax Consequences of Divorce", accessed on Jan. 4, 2015

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