When splitting up marital property, couples tend to focus on the current value of assets. While it is certainly important to understand how much something is worth while trying to figure out an appropriate equitable distribution, Alabama couples need to take other factors into consideration. The potential tax implications of certain family law decisions could leave one person with significantly less than they expected.
While everyone going through a divorce needs to be aware of tax implications, couples over the age of 50 should pay careful attention. These couples tend to have more money stashed away for retirement, and splitting the funds is not always easy. If there are two retirement accounts with roughly equal amounts, some may decide to each keep one account and simply go on with their lives. However, a $20,000 IRA and $20,000 401(k) can actually yield very different results because of the taxes levied against distributions.
Even if a person receives what he or she believes to be a fair portion of the retirement assets, the new tax law may complicate one’s ability to grow those savings. Starting on Jan. 1, 2019, alimony recipients will not have to claim their support as earned income. This means that they will not be able to contribute their alimony to their Roth or IRA savings accounts. Those who have already left the workforce should be certain they take this into account if they are not finalizing their divorce until after the New Year.
Taxes can be a complicating factor across all areas of life. As such, it is important to understand the impact they can have on family law proceedings in Alabama. For particularly complicated assets such as investments or retirement accounts, professional guidance can be helpful for avoiding costly pitfalls.