Many people think about what’s going to happen to the marital home and the retirement accounts when they go through a divorce. However, if you have taxable investment accounts, those will also need to be addressed.
Taxable investments, such as shares of stocks can be split during the divorce. In many cases, it’s possible to divide them equally.
What about tax considerations?
One thing that’s going to have a direct impact on what get from these assets is the tax you’ll have to pay on them. The cost basis, which is the amount that the shares were purchased for is counted at the original amount, not their value at the time of the divorce. When you sell, you’re responsible for the capital gains taxes, which is the sale price minus the cost basis.
The good news is that the date of ownership for the investments is the date you acquired them during the marriage, not the date they were split in the divorce. This is beneficial because if you’ve had them for at least one year, they’ll qualify for the lower long-term capital gains tax rate.
If you own the assets for less than a year, you’ll have to pay the higher ordinary income tax rate. The difference between these two rates can be vast so it’s certainly a consideration to think about before you take any action.
Understanding the options you have during property division is the only way you can make solid decisions. Having someone on your side who can help you make logical decisions during this stressful time is beneficial.