Tax optimization for your divorce in 4 points
Are you getting divorced? You’re about to lose your spouse’s and your children’s shares. How can you limit the fiscal impact?
Manage the tax consequences of your divorce!
1. Pay the compensatory allowance within 12 months
Are you paying the compensatory allowance over a period not exceeding 12 months?
- You : You can benefit from a tax reduction equal to 25% of the amount withheld, up to a maximum of €30,500 for the entire 12-month period (i.e. a maximum tax reduction of €7,625).
- Your spouse: If you receive a compensatory allowance paid over a period of less than 12 months, it does not constitute income and will not be taxable.
Are you paying the compensatory allowance over a period exceeding 12 months?
- You : You do not benefit from a tax reduction, but you can deduct the payments from your overall gross income.
- Your spouse: If you receive a compensatory allowance paid over a period of more than 12 months, this sum constitutes taxable income in the same way as a pension, and may be treated as exceptional income and subject to the quotient system.
If you can, we advise you to pay the compensatory allowance over less than 12 months.
2. Deduct the amount of alimony from your income tax
Since alimony is an expense, you can deduct it from your income, which will reduce your income tax.
3. Don’t overestimate the value of your joint assets
If you have joint assets, and are proceeding with a partition by attribution of these assets, don’t overestimate the value of these assets, essentially for two reasons.
The first reason is that, when you divide your property, you will have to pay the tax authorities a duty of 2.5% of the value of the property to be divided. You can therefore decide on the division of your personal property directly in your divorce agreement. Don’t overestimate the value of your personal property in your divorce agreement: the lower the value of your personal property to be divided, the less you will have to pay in partition fees.
If you overestimate the value of your assets, not only will you have to pay a 2.5% partition fee, but you could also quickly become liable for wealth tax.
4. Avoid paying partition fees by selling your assets before the divorce
When you divide your joint assets, you’ll have to pay a partition fee of 2.5% of the value of the assets divided, after deduction of debts and notary fees.
The problem is that if you are awarded a property in your divorce, you don’t receive any cash, but you still have to pay the partition fee.
How can you avoid paying these fees of 2.5% of the value of the property shared?
Simply make an amicable division before starting divorce proceedings. Before divorcing, you must sell your joint property. You then decide how to divide the money from the sale. At the time of the divorce, there is no deed of partition of the property, so the tax authorities can’t ask you to pay partition fees.
So, if you wish to recover a property at the time of your divorce, and then sell it, we advise you to sell the property before your divorce, and to agree with your spouse to divide the money from the sale. This is a verbal division.
On the other hand, if you wish to keep a property, you must have it allocated to you, and you must therefore pay a partition fee of 2.5% of the property’s value.
What about capital gains on sale?
If you sell your main residence, you are exempt from capital gains tax. So by selling your main residence before your divorce, not only do you avoid paying partition fees, but you also avoid any capital gains tax.
Are you getting divorced? Are you looking for ways to optimize your tax and asset situation? Contact an AGN lawyer in your area, who will advise you and optimize your situation.