Divorce turns your life upside down. In addition to the emotional and logistical chaos, it can quietly complicate your financial future in ways few expect. At HofflerSmith Financial, we help clients navigate the complex tax consequences that often follow divorce. With professional tax representation services, access to an experienced tax advisor, and targeted tax consultation, we guide you through the financial aftermath so you can rebuild.
How Divorce Settlements Can Create Hidden Tax Headaches
Who Really Pays Taxes on the Assets You Split?
Not all assets are taxed equally. While transferring property between spouses is often tax-free during divorce, selling those assets later can trigger major capital gains taxes. Without the right planning, you could end up paying the IRS far more than you ever expected.
Alimony Payments Are No Longer Tax-Deductible
The tax rules on alimony changed dramatically with the 2017 Tax Cuts and Jobs Act. If your divorce was finalized after 2018, alimony is no longer deductible for the payer — and no longer counted as income for the recipient. This shift can derail financial plans if not factored into the settlement.
Retirement Accounts and the QDRO Trap
Dividing retirement accounts like 401(k)s and pensions requires careful legal steps — especially a Qualified Domestic Relations Order (QDRO). Without it, early withdrawal penalties and income taxes can hit hard. A tax advisor should be involved before any paperwork is signed.
Filing Status Confusion Can Cost You
Which filing status should you use after divorce: single, head of household, or married filing separately? Choosing incorrectly (or too soon) can result in penalties or missed deductions. Smart tax consultation can help you avoid filing mistakes that take years to fix.
Tax representation is an invaluable service that can save you time, stress, and money in the long run. If you’re facing tax challenges or want to ensure your tax affairs are in order, consider contacting HofflerSmith Financial. Our dedicated team is here to provide personalized tax representation services and support you through every step of the process. Contact us today for a consultation.