Tax implications of a divorce

The dissolution of a marriage is not only an emotional challenge but also brings forth a variety of practical and financial considerations. In this blog post, we take a look at the tax implications of divorce.

1.   Change of Tariff

With divorce, spouses switch from joint taxation to separate assessment. This means that instead of the spousal tariff, the tariff for single individuals is applied. The key date for this change is December 31 of the following year.

2.   Handling Already Paid Taxes

Open tax liabilities until the date of separation may burden both spouses collectively. Payments made are credited or refunded equally upon separation unless there is another agreement or court ruling.

3.   Maintenance Payments

At the time of separation, it must be determined who has custody over the children, as maintenance payments are tax-relevant. The spouse obligated to pay maintenance can deduct the maintenance contributions from their income, whereas the spouse entitled to maintenance must declare them as income. Maintenance contributions for children aged 18 and above can no longer be deducted and are also not taxed on the child.

4.   Splitting of Pension Provision

The division of occupational pension provisions is carried out equally. Spouses can agree on a different division or forego division entirely. An equal division of Pillar 3a can lead to later tax consequences.

5.   Re-buy into the Pension Fund

After the divorce, gaps in provision occur, which can be filled tax-advantageously through purchases. The Federal Court allows the withdrawal of these deposited funds as capital benefits, even if this occurs within three years prior to retirement.