You may know exactly what you want out of your marriage. While that is fine, there may be certain aspects about dividing your property that you do not think about. You must ensure that whatever division of property you come up with is beneficial in every aspect. This includes both federal tax ramifications and those in Florida.
You have to make many different considerations, but if you are not aware of the tax liabilities, it can be tough to make sure you come out on top. CNBC explains that retirement accounts need careful handling by someone with training in tax liabilities, so you should make sure you work with a professional to separate accounts. In addition, here are three tax-related concerns to keep in mind.
- Splitting an IRA
You will need to rollover IRA funds you receive from splitting an IRA to a new IRA. The bank or financial company managing the IRA will need your divorce papers that state exactly how much to roll over and receive permission to do so. Rolling over the funds is not taxable. However, if you take money out of an IRA, it is taxable.
- Rolling over a 401k
A great way to avoid taxes is by rolling over your portion of a 401k to an IRA. This will not result in a tax liability. Of course, if you need the money right away, this may not be the best option. However, it is the best option if you wish to keep retirement money in a retirement account without additional taxes.
- Retirement becomes income
Keep in mind that if you take retirement funds for use now, you will always pay taxes. The money no longer qualifies as retirement funds. It becomes income, which you will pay taxes on, just as you would for any other income.
Dividing retirement accounts is a tricky situation. You need to make sure that whatever decisions you make, they do not leave you with a huge tax bill.