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Balancing alimony, taxes and divorce settlements

People in Florida who make the choice to get divorced have many factors to evaluate before they agree to a final settlement with their former partner. Some of these things are emotional, some are financial and some may be a bit of both. In the division of assets and debts, there is generally some type of tax liability that accompanies different assets and this liability can go a long way toward changing the actual amount of money a particular spouse either pays or receives. One way this is balanced for some couples is with the allotment of spousal support payments.

As explained by the Internal Revenue Service, these alimony payments are considered income and therefore taxable to the person who receives them. These payments are also deductible on the tax return of the person who makes them. This rule has been in effect for many decades and sometimes makes agreeing to pay alimony palatable so that an agreement can be reached.

However, this plan will no longer be in place starting in 2019. Anyone who completes a divorce in that year or beyond will be needing to evaluate their spousal support and possibly other aspects of their divorce agreement in a different way. According to MarketWatch, it will be the responsibility of the person who pays spousal support to also pay income tax on that money.

The change in taxation on alimony might be hard for both people who pay and who receive it. The person paying may be less willing to pay at all or as much, thereby reducing the amount of money the other spouse receives.

 

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Law Office of Philip J. Schipani
1605 Main Street, Suite 608
Sarasota, FL 34236

Phone: 941-549-8981
Fax: 941-366-7331