Tax consequences of divorce

Divorce is a very emotional subject strained with tension. Conflicts often arise in the clarification of parental custody or alimony payments. However, tax law cannot be neglected in the midst of this turmoil, as otherwise, extensive tax consequences may be triggered. The main tax consequences of divorce are divided into three areas. The cancellation of family taxation, the tax treatment of financial benefits and deductions and thirdly, liability for tax debts. If you have any questions about the tax consequences of divorce, do not hesitate to contact one of our tax attorneys.

dissolution OF FAMILY TAXATION

Through their marriage, spouses form a legal and economic unit. This circumstance is taken into account in tax law. The income of the spouses, regardless of the matrimonial property regime, is calculated together and taxed jointly. If a couple then separates or divorces, the marital unity ceases to exist, and their tax is no longer assessed jointly. This is also the case if the couple has only separated de facto. The separate assessment of the taxes applies from the tax period in which the couple separated or divorced. In addition to the changes in assessment, there is also a change in the tax rate for at least one party. There are three possible rates: the basic tariff, the married tariff or the parental tariff (same as the married tariff). According to tax law, the prerequisite for the allocation of the reduced tariff is that the taxpayer lives with the child in the same household and provides for as their main support. However, various sources, including the Federal Tax Administration’s “Circular 30”, provide for other requirements, such as income or custody.

FINANCIAL BENEFITS AND DEDUCTIONS

The dissolution of the marital unit often results in post-marital alimony and child support payments to the parent who has parental custody of the children. These alimony payments are tax deductible for the spouse providing for the child. However, payments for the fulfillment of other family law related maintenance or support obligations are not deductible. For the recipient of the alimony, the payments are taxable income.

The tax deduction for childcare can be claimed in the amount of CHF 6,500 for each minor or child in vocational or educational training. The parent who pays the child’s maintenance benefits from the tax deduction or, in the case of joint parental care following a separation or divorce, the deduction is divided equally between the two parents. Insurance contributions, such as premiums and contributions to life and health insurance, and child support payments can be tax deductible up to a maximum of CHF 3,500 for married couples, but up to CHF 1,700 for a single parent.

Third-party care costs can be deducted up to a maximum of CHF 10,100 for each child under the age of 14. There are different limits in the cantons between CHF 3,000 and CHF 19,200. This deduction is granted in most cantons in addition to the childcare tax deduction. In all cantons, this deduction is only granted if both parents in an unseparated marriage are gainfully employed or if a single parents who cares for their children is gainfully employed.

LIABILITY FOR TAX DEBTS

The joint assessment of taxes also entails joint liability for taxes. For the federal tax, spouses are jointly liable for the total tax. However, both are only liable for their share if one of them is insolvent. For the cantonal tax laws, there are some differences for the joint liability of the spouses, especially regarding the extent of the liability and its prerequisites.

The tax consequences of a divorce are comprehensive and can be very complicated in individual cases. If you are unsure about any potential consequences, our tax lawyers will be happy to help you.