Many things change during and after a divorce. Money is one very big change for all parties involved. Anyone in Pennsylvania who is in the middle of a divorce may want to consider how the process will impact his or her taxes.
If a couple is in a certain tax bracket and has certain holdings, the status of those holdings and cash flow as a result of the holdings may be altered, as there may certainly be a tax bracket change after divorce. If one spouse suddenly finds himself or herself in a lower tax bracket, he or she may benefit from owing less in long-term gains once taxes are filed separately. Tax bracket changes can affect finances in the short-term and long-term.
The family home can be another source of tax concerns after a divorce. Many couples may be advised to sell the home and simply split the equity. However, if one party keeps the home, the property taxes associated with the home will fall on the shoulders of that party alone, along with other costs associated with keeping the home. Those costs include the utilities, mortgage and the upkeep.
Financial changes are unavoidable once a Pennsylvania couple files for divorce. How those changes affect taxes and the bottom line for one party can vary widely and greatly depends on the income level and tax bracket before and after a divorce. As a party moves through the divorce process, having a clear idea of the holdings and assets and how changes will impact each party is the best way to prepare for the changes that are sure to come.
Source: investmentnews.com, “Consider these tax consequences when splitting assets in a divorce“, Liz Skinner, Dec. 30, 2014