Dissolving your marriage may trigger a number of taxable events that you may need to account for. If you have to sell your Florida home pursuant to a divorce, it may result in paying capital gains taxes in addition to any transaction fees that your local government may levy. In addition, you may owe taxes depending on what happens to a retirement account after your marriage ends.
Tax treatment of retirement accounts
You may be able to avoid early withdrawal penalties and income taxes on proceeds that are taken out of an IRA or 401(k) pursuant to a divorce. However, this may only be true if you roll funds into a new IRA or 401(k) within 60 days of the withdrawal. Furthermore, if a withdrawal occurs before the divorce is finalized, you will likely be subject to fees and taxes even if the end of the relationship was the reason for liquidating the account.
Understanding capital gains taxes
As a general rule, you’ll need to pay capital gains taxes on any asset that is sold for a profit regardless of why. An exception may be made relating to the sale of a primary residence. To determine if you incurred a capital gain, simply compare the sale price to the cost basis of the asset. The cost basis is the amount that you paid for the asset plus any additional costs incurred acquiring, maintaining or selling it.
If you are planning to end your marriage, it may be worthwhile to consider the tax consequences of your decision before submitting any paperwork. This may make it easier to structure a settlement that adequately allocates marital assets. It may also help to ensure that your financial needs are met while living on your own.