New tax laws that are taking effect this year with the passage of the American Taxpayer Relief Act (ATRA) could have an impact on your financial situation if you are in the middle of a divorce. This law was passed by Congress on January 1, 2013 in order to keep taxes the same for middle-class Americans, while increasing the tax rate from 35% to 39.6% for any income exceeding a threshold of $400,000.
A few changes in this law may be important to pay attention to. One involves changes relating to income from alimony. Typically alimony is declared as taxable income, so make sure to be aware of how your tax situation will play out in the long term.
Another change that you should be aware of is a change in tax implications for dividing investments and other assets in a divorce. A 3.8% Medicare surtax on capital gains is now in effect, which could effect the division of stock portfolios and other investments.
This new law also increased the federal capital gains tax rate to 20%, which will cause both parties to pay a higher capital gains tax rate when dividing or selling assets. Both parties should keep this in mind when negotiating a settlement.
This new law has an impact in a variety of ways, when the division of assets is already a complicated process. You should contact an experienced attorney in the Riverside and San Bernardino areas if you need advice on how your own financial situation will be impacted as you go through the divorce settlement process.
Source: Forbes, “Divorcing Women: Will The New Tax Laws Impact Your Divorce Settlement?” Jeff Landers, Feb. 20, 2013