Will I Be Responsible for My Husband’s Business Tax Debt?

Craig’s Answer:

We have a lot of tax debt incurred during the marriage due to my ex’s business. Will I still be responsible for it after the divorce? Nobody wants to pay for a debt that they are not responsible for. Many people own small businesses and when you get divorced you will have valid concerns about taxes and other liabilities that your former spouse may have. Tax liability can be a very tricky area of the law to navigate and it is in your best interest to have experienced legal counsel advising you. Some factors that may affect your potential tax liability for your ex’s debts include:

  • Whether or not the business is classified as separate property or community property
  • Are you receiving a portion of the business or business proceeds as part of the marriage settlement agreement?
  • When the business was acquired by your ex. Before or during the marriage?
  • If the business was started during the marriage, was the business purchased with funds that are considered community property under California law?
  • Like property acquired during marriage, debts that are incurred during a marriage are presumed to be community property and are thus the responsibility of both spouses.

Community property is any property acquired by either spouse during marriage and any property bought with those earnings will be considered community property that is owned equally by both spouses. Similarly, debts incurred during marriage are generally debts of both spouses. If the business was a community property asset when the tax debt was incurred, then you are likely on the hook for at least a portion of the debt. If the business was acquired by your ex prior to the marriage then the business and the debt may be considered separate property. Married people can own separate property that only belongs to them individually. If, for example, you or your ex inherited the business during your marriage then it would likely be considered separate property and the tax burden would only belong to the spouse who inherited the property. Property classification issues can be quite complicated especially when there are overlapping state or federal tax considerations. It is in your best interest to contact an experienced family law attorney who can assist you with. The attorneys at Fisher & Van Thiel have years of experience handling complex divorce cases where property and debts have to be distributed.  Call our office today for a consultation!




Posted in: Divorce, Family Law, Property Division