Disclaimer: This article does not constitute legal advice. If you have any questions about your individual situation it is best to seek the advice of an experienced legal professional.
The 2023 US tax deadline has just passed, leaving many people relieved that they don’t have to deal with tax for another year. For people getting an international divorce however, tax is a year-round concern. Filing deadlines differ in different countries, so preparing your tax could be a matter of filing in more than one jurisdiction in addition to deciding whether to file married or separately. Some countries file in April, some in June, some in October, and the list goes on. The US has complex tax laws and treaties with other countries, which impose tax and offer tax relief based on the resident, non-resident and naturalization status of the taxpayer and their relationship to a US taxpayer, resident or citizen. For people getting an international divorce, both spouses could be nonresident citizens, one or both spouses could be nonresident citizens, one or both spouses could be nonresident aliens and for each of these scenarios there are different tax consequences which impact an international divorce.
For US expats, the tax deadline can be extended to June 15th to allow extra time for filing. The US offers tax credits and tax exemptions for internationally based US citizens. If you or your spouse are not US citizens, there are further complications surrounding the transfer of property in divorce.
Tax Considerations for International Divorce
If you are getting an international divorce, particularly if you have complex assets, there are an array of factors to consider. These may include:
Are you citizens, residents or non-residents?
Your immigration status can have a big impact on the tax consequences in your divorce. For example non-resident, alien spouses could be deprived of tax breaks incident to divorce. A property transfer to someone without legal US status could result in a tax obligation to the transferor.
What are the US Tax Treaties with the Country or Countries Where the Property is Held?
The US has tax treaties with individual countries that establish the tax obligations that US expats have to pay on foreign property or income. These vary and you will need to work with highly skilled tax professionals and international divorce mediators to decide on the best tax strategy.
How and When Should You File?
Deciding how and when to file taxes is an important component of international divorce. You may need to get an extension to give you time to get your affairs in order. You may choose to file married but separately. Filing your divorce in multiple jurisdictions could mean juggling multiple deadlines and deciding on the most advantageous way to file.
How Should You Transfer Property? Should You Transfer Property Within the Marriage?
As US citizens you can transfer marital property “incident to divorce” which could save you money on tax. Depending on the situation, you may or may not be able to take advantage of this, or it may be better to transfer the property by gifting property within the marriage or otherwise exchanging it in tax favorable ways.
High Level International Divorce Mediation Services
A key element of high level international divorce mediation involves assessing the financial impacts of property transfers in divorce, including tax consequences. At Divorce Options San Diego, we are highly skilled, experienced divorce mediators who assist divorcing spouses who have complex international assets to get an efficient and conflict-free divorce. Unlike adversarial forms of divorce, divorce mediation gives spouses the opportunity to optimize the community property by making tax-smart, financially savvy decisions about marital property division. We offer in-house tax expert and appraisal services and work with experts to perform a high level analysis of the community property. We aim to take the stress and headache out of complex divorce by offering a streamlined divorce package that includes document services and other services that support your divorce transition. We have offices in San Diego, CA, Silicon Valley and Berkeley, CA and can mediate remotely from wherever you are via secure private serve. Please contact us to learn more about our international divorce mediation services.
