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Alimony is generally deducted from the taxable income of the paying spouse and included in the taxable income of the receiving spouse. This transfer of income between former spouses shifts the burden of paying taxes on the amount of alimony paid during the year from the paying spouse to the receiving spouse and appropriate adjustments to income tax withholdings or quarterly estimated income tax payments should be made.

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Child support is income tax neutral (payments are not deductible by the parent making them or includible by the parent receiving them). There are, however, many other income tax considerations associated with dependent children in family law cases, including (1) filing status, (2) the earned income credit, (3) dependency exemptions, and (4) the child tax credit. Parents with whom dependent children spend more than one-half of their time are entitled for file as “head of household,” a more favorable filing status, and may be eligible for an earned income credit depending on their income and number of children living with them; these benefits are dictated by the law and cannot be changed. Dependency exemptions, on the other hand, can be allocated by agreement or court order; parents paying child support are often given the right to claim some or all of the children as dependents, thus reducing their taxable income, and possibly entitling them for to a child tax credit for any child who is under 17 years old.

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For many couples, their home represents one of their most valuable marital assets. For the purposes of a divorce, its current fair market value will be offset by the current balance of any mortgage, home equity loan, or other liability encumbering it; the couple’s equity in the marital home is what is important.

If the couple has any school aged children living in the marital home, the marital home is considered much more than an asset because it is a home base for the children. Generally speaking, a court is unwilling to disrupt the children significantly to divide the equity in the marital home between divorcing parents unless it will simply not be affordable after the parties separate. In such cases, a court is likely to defer the division of the equity in the marital home until the last child graduates from high school or attains the age of 18 or to offset the equity against some other asset to be taken by the parent who leaves the marital home.

Other real estate owned by a couple can be divided at the time of the divorce without delay. Again, it is the equity (fair market value less any mortgages or other encumbrances) which is important.

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In family law cases, the parents’ financial obligations to their children end on their emancipation (becoming independent). As noted above, this is not the same thing as becoming an adult on attaining the age of 18. By statute, Massachusetts differentiates between (1) children who are under 18, (2) those who are between 18 and 21, and (3) those who are between 21 and 23. There is no question that children in the first group will be considered dependent and entitled to financial support from their parents. Children (young adults, legally) in the second group will be considered dependent if they are actually dependent on their parents for support, evidenced by such things as living with a parent because they are unable to support themselves financially. After attaining the age of 21, however, this dependence must be related to the pursuit of an education for children in the third group to be entitled to continued financial support from their parents.

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Retirement accounts such as pensions, tax-deferred savings (401Ks, 403Bs, and IRAs), and tax-deferred annuities can also be divided to achieve the required equitable division of marital assets. Through the use of Qualified Domestic Relations Orders (QDROs) and letters of instructions, such accounts can be allocated between a divorcing couple without the income tax liability normally associated with an early withdrawal from a retirement account.

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Other financial accounts such as checking, savings, brokerage and investment, money market, and certificates of deposit can also be divided between a divorcing couple to achieve the required equitable division of marital assets.

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During the course of a marriage, a couple will probably acquire many personal belongings, including motor vehicles, furniture, jewelry, electronic equipment, tools, and many other items. At the time of the marriage, some of these belongings may be very valuable (such as a relatively new car not encumbered by a loan) and others may no longer be worth much (such as a 20-year old kitchen set). Neither courts nor attorneys really want to get into the minutia of deciding who gets what unless the couple cannot or will not work out the division themselves. There are a few general principles to keep in mind: items used by any children living in the home are likely to remain there for their use after the couple separates (their needs come before the desires of the parents) and the division should, taking into account all of the other assets being divided, be equitable.

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Marital debt must also be considered in the equitable division of marital assets and liabilities. It is not important whose name is on a particular loan, credit card, or store charge; what matters is whether it was used for the benefit of the family as a whole or for that of the individual person. Thus, credit charges related to a family vacation will be considered marital while those related to a trip to the casino by one of the parties will not.