Tax implications on Separation

Hi,

I am in the unfortunate position of splitting up with my wife and am a little confused with some of the Revenue forms on taxaton implications - could you help me with the following situations .?

We own two houses - both in Joint names - I hope to move into the second house but my wife is pressing for that to be sold so she can take her share of the accumulated equity - would there be a CGT liability on the proceeds as the revenue form seems to state that disposals of assets during a separation are not liable for CGT - does this only refer to the family home or to all assets held ?

How does the Single parent tax credit work - do I need to have a formal custody document to be able to claim the tax credit ?

If in point one I succeed in retaining the second house as my home can I claim TRS on that mortgage while paying the mortgage on the original family home ?


What is the best method to pay maintenance to reduce liabilities for both of us ?

Are there any specific tax rebates that are paid in the year of separation ( this is anecdotal and may be a myth ? )


Hope you can help - if you could recommend a good Tax adviser specialising in Separation I would be grateful....?

Lots of questions and I'm not offering any answers at this point but the Irish Taxation Institute do have a book - The Tax Implications of Marital Breakdown - which might be useful if you can get your hands on a copy.

Anything useful here?

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What you mention sounds very complicated.

I can recommend the Family Law department in Beauchamps Solicitors (based in Dublin City Centre), they don't come cheap but would be very experienced in dealing with the type of situation.

As regards the single parent tax credit, you will require a signed copy access agreement stating the time you spend with your child, and you MUST have at least 1 overnight stay in the year to qualify.

For relationship advice, and advice as to how to handle access etc try the following websites:

www.rollercoaster.ie
www.solo.ie
www.treoir.ie

HTH

Thanks Guys - have done the trawl on Oasis and Revenue - some of the terms are a little ambiguous hence my questions.

Next steps must be to see a tax advisor....

Single parent tax credit can be claimed by any parent who has responsibility for their child and is not living with the child's other parent. In my experience in this area, Revenue do not seek evidence in regards to over night access or written access agreements.

Only one home can be nominated as the Family Home and the transfer of this property is not subject to tax, be that Stamp Duty or CGT. The proceeds of the sale of the 'non-Family Home' (for want of a better description) will be subject to tax in the usual way.

In regards to maintenance payments: payments made for your spouses maintenance can be set against your taxable income, but is taxable as income in your spouses hands. Child maintenance cannot be set against your taxable income. If your spouse is not working it can make sense to pay a higher level of spousal maintenance and a lower level of child maintance.

There are different rules that apply to tax in regards to the year of separation; but I don't recall them clearly off the top of my head. I doubt you'll make any money on it though

In regards to TRS; to the best of my knowledge ( and I'm willing to be corrected on this) you can only claim TRS on one property.

The best piece of financial advice I can give you in regards to separation (with apologies to all lawyers) is to keep the lawyers out of it if you can. They don't do much that you can't do for yourselves provided you can communicate and can often make matters worse by use of legal language that puts backs up.

Family Mediation is free and is very helpful. There are offices in Tallaght and in Dublin City Centre. A phone call to the main office will give details of an office nearer to you if necessary.

Thanks K - agree with you on the lawyers ( no apologies here ) and am on the list for Mediation.

Sorry if my questions seem insensitive but when you are looking at my future you need any help you can get from the taxman

Regarding the mortgage relief, the following is the Revenue position:
14. Can I claim tax relief on mortgage interest which I pay on my separated spouse’s residence?

Yes, provided you are obliged to pay the interest and the loan is used for the purchase, repair, development or improvement of your spouse’s sole or main residence. If you are also paying interest on your own principal private residence tax relief will be available on both properties.

The tax relief granted will be subject to the relevant maximum limits - see Leaflet IT 60: Home Loan Interest Relief. If you are taxed as a single individual the single person’s maximum interest limit will apply and if you are treated as a married person the maximum interest limit for married persons will apply.
Re CGT: There will be a CGTliability on the sale of the 2nd home.
Re maintenance. The advice already given is correct. However the thing about the child maintenance being reduced as a tax advantage mey not be great long term however as you might have to continue paying high spousal maintenance after the children leave school.
Re Tax Rebates: There are some advantages in the yaer of separation if both parties have been working.
Re Single parent: the allowance is given without much question but you must have at least on of the children living with you for at least one night per tax year.

Thanks for that....was thinking along those lines - clarifications are great.

Another thing that might be relevant is that a separated/divorced spouse who does not retain ownership of the family home can be treated as a first time buyer if/when they buy another property even if they were a joint purchaser of the family home and, as such, normally not an FTB.

"The best piece of financial advice I can give you in regards to separation (with apologies to all lawyers) is to keep the lawyers out of it if you can."

You won't find many lawyers arguing with this. A case where the terms are agreed, and the lawyers only has to take care of the formalities (getting it put in writing and through a court) is what every family lawyer wants. While some solicitors are very good indeed at handling contentious breakups, and perform a valuable service in so doing, I doubt if anybody enjoys this work much.