The 2015 tax season is upon us. At this point in the year, many accountants are focused on preparing and filing tax documents for their clients. The following guide to tax planning deductions relating to divorce can help you minimize your tax expense.
Tax Preparation Deduction
Tax planning deductions include fees paid for tax preparation and advice. Generally, these deductions include:
- Fees paid for having a tax return professionally prepared.
- Advice on tax planning.
- Receiving legal guidance on tax issues.
- Legal fees paid for representation involving a tax matter.
- Professional fees and costs paid in response to an income tax audit.
- Fees paid to file taxes using tax preparation software.
These deductions are often straight forward and quickly spotted by tax professionals.
Often Overlooked Tax Planning Deductions In Divorce
“Personal” legal fees are generally not deductible under IRS rules. However, there are certain costs that taxpayers may incur that constitute tax advice and are thereby tax deductible. Taxpayers are able to deduct the following:
- Fees and costs incurred during a divorce to structure a property division in order to have the most ideal impact on taxes. This may include advice to determine how property should be allocated from the tax perspective, and correctly identify the tax basis of that property.
- Fees and costs incurred to accurately determine the adjusted tax basis of assets for tax purposes.
- Cost of advice received and fees associated with preparing portions of a settlement agreement that ensures a structure for support payments to be deductible.
- Advice and fees associated with structuring a settlement agreement that maximizes the amount of spousal support that is deductible or that minimizes the amount of spousal support that is taxable.
- Cost incurred when seeking advice on the tax implications of a divorce, separation or property settlement.
- Fees associated with allocating dependency exemptions for tax filing.
For additional information on tax planning deductions in divorce or for a professional review of your tax filing, it is best to work with a quality CPA firm. Schedule a session with a qualified CPA to ensure that your personal taxes maximize deductions and minimize your tax expense.
