Three Proven Techniques For Getting The Government To Help Pay For Your Divorce

The way for you to do that is to use the tax reduction strategies that I am about

to teach you and in essence get the government to help pay for your divorce. If you don't use what I am about to teach you, you'll pay more than you should and in essence reduce your cash flow.

Taxes could be a very large divorce expense if you do not plan ahead. Most men go blindly into a divorce without examining all of the tax consequences and end up paying more than they should have. Your CPA and CDFA(TM) can help determine what those taxes are and may help you create a Divorce Blueprint (Divorce Financial Plan) that may save you thousands of dollars in taxes and/or protect you from making critical mistakes that could cost you dearly.

Because I am a Certified Financial Planner(TM) (and a Certfified Divorce Financial Analyst(TM)), people often ask me, "Hey Scott, what's a good investment?" My standard answer is, "Financial education because it leads to clarity which leads to wise decisions." The same thing is true in your divorce. You have to look at the tax implications before you finalize your divorce or else you could be in for a shock later on and then it's too late.

There is the old adage that says, "You make your profits on a real estate investment when you buy." That is true. Before you invest in anything you have to have an exit strategy that factors in the future tax consequences. The same thing goes for any divorce strategies or decisions. Have your CPA and/or CDFA(TM) review any potential settlement offers in advance from a tax perspective.

Do you think that a CEO or successful business owner finalizes a transaction without first running it by his team of accountants and tax advisors? Hardly! Yet so many men do not take the time to do this and end up losing out on all kinds of tax savings.

Your divorce attorney is not a tax advisor! Sure they know that alimony is tax deductible and child support is not and may know a few things about taxes but they are not experts in this area. If you need brain surgery wouldn't you want an experienced board certified brain surgeon and not a heart surgeon? Of course you would! DO NOT MAKE ANY DECISIONS UNTIL YOU HAVE THE TAX IMPLICATIONS REVIEWED FIRST!

Here are three ways you may reduce your taxes as it pertains to your divorce settlement:

1.) Dependents:

Who is going to claim your children as dependents this year and subsequent years? Sometimes your divorce attorney will suggest that you alternate years. But that may not be fair and could be a waste of tax savings. If you are in a substantially higher tax bracket after your divorce than your ex-wife then you should try to get her to agree in writing as part of your divorce agreement to letting you have the kids as dependents on your tax return.

2.) Childcare Credit:

There is a non-refundable childcare tax credit available for the custodial parent who pays child or dependent care expenses so that they can work. A tax credit is a dollar for dollar reduction off of the taxes you owe and is much better than a tax deduction.

Now I know you may be thinking that you don't know who is going to be the custodial parent yet. You need to know about this tax credit in advance to help you create a win/win deal.

If you have one dependent under the age of 13, then you may qualify for a credit of up to $1,050 or up to $2,100 if you have two or more qualifying children. Remember that this is for the custodial parent. This credit may add up to a fair amount of tax savings over a period of time. That is a $21,000 tax savings over a 10-year period of time for two or more children.

3.) Earned Income Credit:

A qualified taxpayer is entitled to a tax credit equal to 34% (or 40% for a tax payer with two or more qualifying children) of earned income that does not exceed $8,390 for a tax payer with one and $11,790 with two or more qualifying children.

Summary:

The Internal Revenue Code is vast and extensive and changes over time. Look at it as an instruction book on how to "save taxes" by following the rules. Your CPA is trained in this area. If you are a business owner your situation is more complex and will require more in-depth analysis to make sure you understand all of the tax consequences pertaining to your divorce. Invest the time and money to have a Divorce Blueprint created with a thorough tax analysis done. You will be so glad you did.

by: Scott Martin

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