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Federal tax law may impact Georgia high asset divorces

Georgia readers have undoubtedly heard about some of the deadlock members of Congress are expressing over budgeting and tax issues. Fears about a fiscal cliff are some of the sound bites that have become all too familiar in recent months.

What readers might not realize, however, is that some of the new tax laws might impact couples currently in the middle of divorce proceedings. The American Taxpayer Relief Act, passed on January 1, 2013, impacts certain matters regarding income and division of assets. Those couples in a high net worth divorce may be most affected.

Under ATRA, tax rates were raised on higher incomes, including the creation of a new 39.6% tax bracket for the highest earners. As a result, an individual who is designated to receive spousal support or alimony may be bumped into a higher tax bracket. For such individuals, it may make better financial sense to receive a one-time lump sum payment, instead of monthly checks. A lump sum payment might not be taxable to the recipient, thus avoiding costly income taxes on monthly alimony checks.

ATRA may also impact how assets are divided in a divorce. Under the new law, a 3.8% Medicare surtax is imposed on capital gains, or investment income, that exceed $200,000 for a single filer. In addition, ATRA has raised the federal capital gains tax rate from 15% to 20% for individuals whose incomes place them in the new 39.6% tax bracket.

As this post illustrates, a high net worth divorce may require extra attention under the new tax law. For that reason, divorcing couples can benefit from the expertise of a divorce attorney who specializes in high net worth divorces.

Source: Forbes, "Divorcing Women: Will The New Tax Laws Impact Your Divorce Settlement?" Jeff Landers, Feb. 20, 2013

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