California Divorce and Taxes

10 Common Tax Questions to Ask About Your California Divorce

by Susan L. Jeffries, JD, Ll.M.(Tax)

Should my divorce settlement be based on face value or tax basis?
Both. the difference could put money in your pocket or take taxes out.

If I move out, can I roll over the gain when the house is sold?
NO. Now you get a $250,000 exclusion from capital gain if the home has been your "principal residence" for two years. See Internal Revenue Code Sec. 121 for more rules.

We are over age 55. should we sell the house before or after the divorce?
Makes no difference. The "over 55" tax exclusion has been repealed and replaced by Sec. 121.

Should we file a joint return?
Not unless both spouses only have W-2 income.

Can I make child support deductible?
Maybe. If you also pay spousal support ask about "family support".

What happens if alimony continues after death of the recipient?
The IRS may treat it as a property payment and you lose the deduction.

Are taxes and proceeds from sale of property split in the same proportion?
No

Can I pay all the alimony I owe in the first year.
Yes but you may lose the tax benefits related to payments that qualify as "alimony".


Should I fight for the dependency exemption?
Not unless it will do you some good.

Do I need a tax expert?
Yes, if you have valuable assets or suspect tax violations.

You need tax advice to plan for the result you want and avoid unpleasant tax surprises.