Alimony and Divorce
There are many things to consider before filing for divorce. Divorce is never easy to navigate and receiving proper advice for divorce is essential. If you are considering filing for divorce one of the most important considerations is alimony. Alimony may have a negative connotation, but the truth is that alimony can be valuable to both parties. Educate yourself so you can obtain the benefits no matter if you are paying or receiving alimony after your divorce.
Paying alimony, due to IRS tax rules and regulations, may have benefits for the payer. If planned and prepared properly, the paying spouse may be able to deduct the amount paid from their overall income. This is an important benefit because it lowers that spouse’s tax liability. The outcome over time could be substantial, particularly if the payments drop the payer into a lower tax bracket.
Consequently, the spouse collecting the alimony must report the compensation as additional income on their taxes. At the same time, if structured properly by the appropriate tax professionals, the payer could keep extra assets and reduce their tax liability. The benefit for the receiving spouse is that they collect these payments over a long period of time which provides a level of security. This spouse is almost always in a lower tax bracket which shrinks the tax liability of the marital assets.
Guidelines for alimony should be drafted properly:
* Following the divorce, you and your partner cannot file a joint tax return and cannot live together under the same roof.
* The compensation has to be made as part of your written divorce settlement.
* The compensation cannot be made to a third person, but should always be paid directly to the former spouse.
* The divorce decree should not specifically say that the payments are for alimony.
* The payments cannot be classified as child support.
* Each disbursement must be made by cash, check, money order or cashier’s check.
* The requirement to pay alimony must come to an end if your ex-spouse dies.
The key to finding peace with your ex-spouse after filing for a divorce is balance with alimony payments. Usually one spouse makes more money than the other spouse, and alimony can be used to level the income disparity. Alimony generally ends if the receiver remarries or chooses to live with another person.
When choosing the amount that should be paid for alimony the court will ask the couple about their lifestyle.
- What were they accustomed to spending each month?
- How did they live?
- What level of education does each spouse have?
- How much income is required for the supported partner to be able to live on their own?
It is very important for each spouse to keep detailed records. If you are the payer, be sure to itemize each check, the date, the check number, amount, and address where it was mailed. Also, keep the check after it is cashed and returned to you by your financial institution. Keep all of these records with your tax return for the corresponding year. It is also imperative for the recipient of the alimony payments to keep detailed records as well.
Hiring a Divorce Lawyer
Alimony does not have to be a source of stress. Be upfront and honest. Divorce can be complicated; protect yourself by consulting with a divorce lawyer. Divorce attorneys understand alimony and divorce law. Make sure you and your family will have enough money for a secure future.