What Happens to Rental Income in the Event of a Divorce?

Many spouses in Georgia choose to maintain rental properties throughout their marriages, and this decision can provide excellent, semi-passive rental income. However, this income may lead to complexities in the event of a divorce, as it might not be clear how to divide both past and future income of this nature. 

Rental Income Generated During the Marriage

The rental income that is generated during a marriage may become important as spouses consider their assets during the equitable distribution process of a Georgia divorce. One of the most important things to consider is the nature of the underlying real estate property. 

The real estate will either be classified as “separate” or “marital” property. It may earn the “separate” classification if it was owned by one spouse prior to the marriage. It can also be classified as separate if it was purchased entirely with separate funds – such as an inheritance. In the latter example, it can still be classified as separate even when purchased during the marriage. 

If the property is, in fact, separate, any rental income generated by that property is generally also separate. This means that as long as the spouse is careful to put these rental earnings in a separate account, they cannot be divided during a divorce. Note that even if these rental earnings are transformed into different assets, they still count as separate. For example, a spouse may use their separate rental income to purchase stocks. If these stocks appreciate in value, the total profit still remains separate. 

If the rental property is marital, on the other hand, all rental income earned must also be marital. This means that it is divided during a divorce. On a separate note, any increases in the real estate’s value may also be classified as marital property – even if the underlying real estate is a separate property. 

Considering the Impact of Rental Income on Post-Divorce Issues

Rental income may continue to play a role in the financial affairs of both spouses even after the divorce. For example, a spouse’s rental income may be considered when calculating child support or alimony. If the real estate is marital, then both spouses may wish to maintain the property and continue to co-own it. This will ensure equal rental income for both spouses – potentially providing a valuable source of mostly passive income. 

Of course, spouses may also wish to sell rental properties and divide the resulting cash. Spouses may then use the funds to invest in new rental properties or other investment opportunities. Consider discussing the tax implications of these various choices alongside a qualified, experienced divorce attorney. 

Where Can I Find an Experienced Divorce Attorney in Georgia?

If you have been searching for an experienced divorce attorney in Georgia, look no further than Lankford & Moore Law. Over the years, we have helped numerous divorcing spouses throughout the Peach State, including those who need to divide complex assets. We know that rental income can pose certain challenges, but the most appropriate course of action often becomes clear after a consultation with a divorce attorney. Reach out today to book your consultation and get started with an effective action plan. 


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Mahatma Gandhi

Lankford & Moore Law in Downtown Lawrenceville

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