New York, NY family law attorney Lisa Zeiderman talks about how taxes affect your divorce settlement. Taxes are a crucial factor in divorce settlements, making it essential for matrimonial attorneys to identify tax-related issues thoroughly. For instance, restricted stock units (RSUs) are typically taxed as income when they vest. If one party is planning to retain their RSUs in exchange for a payout, it’s important to ensure these stocks are taxed appropriately and to include a provision in the agreement for future tax adjustments. This allows for corrections if taxes were initially underpaid or overpaid.

Capital gains tax is another key factor. If one spouse plans to keep the family home purchased years ago, potential capital gains taxes on a future sale must be considered. These taxes are often omitted from the settlement because it’s uncertain when, or if, the home will be sold. In some instances, selling the home during the divorce or structuring ownership to maximize tax benefits—such as the $500,000 capital gains exclusion for married couples, compared to $250,000 for single filers—may be advantageous.

Additional tax considerations apply if a business or other real property is sold, necessitating capital gains calculations for these assets. Brokerage accounts also require careful assessment, as stocks purchased long ago may have appreciated, leading to capital gains. When dividing stocks, it’s essential to address tax implications, whether through payouts or in-kind transfers. This includes equalizing the cost basis to ensure both parties share the tax liability proportionately.

These tax considerations are critical throughout the divorce process to prevent unexpected financial burdens and to promote a fair and equitable division of assets.