When you and your spouse split up what you own, you don’t have to pay taxes on it. It’s been this way since 1984, when the laws that said divided property could be taxed were overruled by the Supreme Court.
However, that doesn’t mean that you shouldn’t think about taxes during the property division process in Florida. Depending on the type of property being split up, all may not be as equal as you think.
For example, imagine that you and your spouse bought a home three decades ago, and you paid $500,000 for it. You know that it’s now worth $3.5 million. You also have $3.5 million in your bank account.
Rather than selling the home during the divorce, which can be time-consuming, your spouse proposes that you take the house, he or she takes the $3.5 million in the bank and you call it even. You agree, thinking that you can sell the home on your own and have just as much money as your spouse.
However, your spouse does not have to pay taxes on the $3.5 million in the bank. If you sell the home, you have to pay on gains over $250,000. In the above example, you’ll have effectively gained $3 million, meaning you have to pay taxes on $2.75 million. As you can see, your spouse is actually getting a far better deal than you, and things are not as even as he or she made them out to be.
Be sure you really look into all aspects of property division, from a legal perspective, so that you know whether or not the proposed plan is fair to you.
Source: Forbes, “How To Make Divorce Less Taxing,” Robert W. Wood, accessed Jan. 27, 2016