Not every divorce involves significant tax issues. Moreover, many mediation participants are capable of understanding basic tax issues, such as child tax credits, that can arise in a divorce. More challenging tax issues include the tax deductibility of alimony, transfers from retirement accounts using Qualified Domestic Relations Orders (QDROs), couples owing back taxes, 529 college savings accounts, how long divorcing spouses in Massachusetts can file “joint” tax returns, and tax issues concerning the marital home. It’s important to recognize that even the most tax-aware divorce mediator generally cannot provide specific tax advice to divorce participants. For this reason, it often makes sense for mediation participants to consult with an outside tax expert, either individually or together, before finalizing their divorce agreement. (Similarly, a tax-aware mediation coach can often assist a participant with specific tax issues.)
However, a tax-aware mediator can play and important role in spotting and avoiding tax issues that can arise in the divorce context, as well as drafting divorce agreement provisions that effectuate the tax goals articulated by the participants. For a more complete rundown on tax-aware mediation, check out Kim Keyes’ blog, Tax Reform and Divorce: Is Your Divorce Mediator Tax-Aware?