Divorce Can Create Lingering Tax Liabilities for Ex-Spouses

A home with $450,000 in equity appreciation generates $0 in capital gains tax when sold by a married couple filing jointly under the $500,000 exclusion. The same home sold later by a single ex-spouse triggers tax on the $200,000 that exceeds the $250,000 single-filer exclusion. Divorce affects more than 670,000 American couples each year. An uncontested DIY divorce costs $500 to $1,500 in filing and service fees; lawyer-involved cases can reach $50,000 or more. Both spouses remain 100% liable for back taxes, penalties and interest from joint returns filed while married. A Notice of Federal Tax Lien filed during marriage attaches to marital property and can remain on title until resolved in the divorce settlement. Retirement contributions between the wedding day and separation or divorce are marital property in all 50 states. A 401(k) withdrawal to pay an ex-spouse is generally taxable income; a QDRO allows the transfer without immediate tax. IRAs need a trustee-to-trustee direct transfer written into the divorce decree to remain tax-free. Contested: none identified. The record shows one right-rated outlet and no left- or center-rated coverage.