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Law Offices of
William L. Hoge, III
Family Law Attorney
200 South Seventh Street
Suite 506, Legal Arts Building
Louisville, Kentucky 40202
(502) 583-2005

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INCOMES OF THE PARTIES

Income in a Kentucky Divorce

Accurate income information is essential in the simplest to the most complex case. The court uses this information to assess everything from the fee for mediation to awards of child support, maintenance and attorney's fees.

The Divorce in Kentucky Organizer will help you consider many possible sources of income. Of prime importance is collecting all documents which might help you verify your income or that of your spouse.

A Word About Divorce and Taxes

One extremely important and revealing source of financial information used in marriage dissolution is tax returns. In more complex divorces, tax issues can play a major role in the resolution of the case.

The following general rules are intended to alert you to issues and provide you with general information. Before you sign or take any actions with respect to your federal or state income tax returns, review your situation with your tax adviser.

If both you and your spouse sign a joint income tax return, each of you can be held responsible for all of the taxes due.
If you are separated from your spouse, do not sign or file a joint return without first clearing it with your attorney.
If you are having trouble securing past joint tax returns, you may get them directly from the Internal Revenue Service by completing IRS Form 4506.
You may officially notify the IRS that you have changed your mailing address from the address used on your last tax return by filing IRS Form 8822. You should not do this without consulting your tax adviser, as there may be circumstances under which it may not be appropriate.
At the time of this writing, spousal support, or alimony, is taxable to the recipient spouse and deductible from the income of the payer spouse if all IRS requirements are met. However, you and your spouse may elect not to make spousal support or alimony taxable.
There are some very technical requirements imposed by the IRS with respect to deductibility of spousal support or alimony. Your attorney or accountant can help you understand these rules.
Child support payments are not deductible from the income of the spouse paying nor are they taxable to the recipient spouse.
Generally, the custodial parent will be entitled to claim the dependency exemption on his or her income tax return. The custodial parent (the parent who has custody) may execute IRS Form 8332, releasing the dependency exemption to the non-custodial parent. Some states will determine who gets the dependency exemption and require the other spouse to sign a waiver.
Generally, there is no tax gain or loss recognized as a result of the division of property between spouses upon divorce. Thus there is no tax incurred by dividing the property.
It is important to know the basis of the property that you receive in the division of assets. This basis is generally the cost of acquiring a capital asset. If the asset has appreciated, the person who receives that asset will be responsible for tax on the appreciation when the asset is sold.
When you and your spouse sell your jointly owned residence, you will each be responsible for reporting half of any capital gain (the profit resulting from the sale of capital investments). To defer the tax, each spouse must purchase a new residence within two years. The new residence must cost at least half the sale price of the old.
If you or your spouse are over age 55, or nearly 55, you should be alert to the once-in-a-lifetime exclusion of $125,000 of gain on the sale of a residence. If you meet the criteria and sold the residence while married, only one exclusion is permitted. If you terminate the marital status before the sale, you may both be entitled to an exclusion.
Generally, fees incurred for the production of income, such as obtaining spousal support or alimony, are deductible. IRC 212 fees for tax advice are also deductible. Fees incurred defending against paying alimony are not deductible. If your spouse pays your fees, you may not take the deduction.
A person qualifies as head of the household for income tax purposes if he or she provides more than half the costs of a home for him or herself and a child or other dependent.