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Most people do not base their separation or divorce around their tax-planning options. Rare is the individual who moves out of the marital residence knowing the impact of losing half the accumulated mortgage interest, or whether he or she will be filing tax returns jointly or separately from his or her spouse. Instead, tax issues are often left until an asset is sold, or the end of the year approaches without the prospect of a divorce decree being issued.
Some tax liabilities cannot and should not be afterthoughts, while others offer unique opportunities to address an issue in the distribution of the parties' marital estate creatively. The following tax issues can be of particular importance during a divorce, and have meaningful impacts on the estate and tax liabilities of the parties.
Child Exemptions
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