Tax Aspects of Divorce: From Alimony to Property Settlements

Property settlements are a major component of a divorce settlement. Although the transfer itself isn't taxed, there are tax consequences that should be considered. Appreciated property and stock transfers are usually divided based on fair market value; however, the cost basis of the items transferred can generate substantially different tax payments for the taxpayer and spouse. Eligibility requirements for the IRC Section 121 gain exclusions must be considered when a personal residence is sold or transferred incident to divorce. And a qualified domestic relations order may be needed to defer taxes on retirement plan transfers.

The Tax Act of 2017 significantly altered the tax consequences of divorce. Beginning with 2019 divorce agreements, alimony is no longer deductible by the payor or taxed to the recipient. However, older agreements can be modified to incorporate changes made by the Act. The suspension of the dependency deduction somewhat negated the need for certain provisions in a separation agreement. Beginning in 2026, however, the dependency deduction returns, making this again a relative tax choice for divorcing parents. Tax advisers working with married clients need to know the tax consequences of decisions made during a divorce.

Listen as our panel of individual income tax experts reviews the particulars of tax planning relative to divorce, focusing on tax-saving steps for divorcing clients.

1. Tax aspects of divorce: introduction
2. The Tax Act of 2017
3. Alimony and child support
4. Pre-marital and post-marital agreements
5. Property settlements
   1. Retirement accounts
   2. Personal residences
   3. Business interests
   4. Investments
   5. Appreciated property
6. Dependents
7. Recent cases

The panel will cover these and other key issues:

• The impact of the Tax Act of 2017 on divorce
• When property division can trigger tax
• Calculating tax on appreciated property transferred due to divorce
• Recent court decisions relative to tax issues in divorce

Learning Objectives

After completing this course, you will be able to:

• Identify caveats to avoid in property divisions
• Determine tax effects of the Tax Act of 2017 on divorce
• Decide how the Section 121 gain exclusion is impacted by divorce
• Ascertain how a divorce agreement influences the dependent exemption

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of individual income taxation, including itemized deductions, individual income tax credits, net operating loss limitations including carrybacks and carryforwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).