Society seems to change daily as time passes. The once proud institution of marriage has definitely taken a hit. With roughly half of all marriages failing, tax issues have to be addressed.
Divorce is an ugly subject no matter how you look at it. Brawling parents, stressed out kids – oh, the fun. The divorce process can take a long time and be expensive given the hourly rate of your friendly family law attorney. When the final divorce decree has been ordered by the court, the fun isn’t over. Yep, you and your ex-now have to deal with tax issues. Understanding them can avoid making a bad situation worse.
Alimony is a big issue in many divorces. Alimony can generally be described as payments made from the wage earning spouse to the other to maintain a certain lifestyle. The subject is well beyond the scope of this article, but it is a frequent issue in most divorces. Each state handles it differently. The IRS, however, has a very specific written in stone and you need to know about it.
The IRS wishes to congratulate you on your divorce by introducing tax liability to it. In this case, the agency is going to tax you on any alimony payments you receive from an ex-spouse. If you are the one paying, the news is a little better. You can deduct the alimony payments! Both of these rulings are only applicable if the final divorce decree states that one spouse must pay the other alimony. If it does not contain such wording, then any payments are neither taxable nor deductible. How exactly the IRS came around to this view is a bit of a mystery, but it apparently likes to add just a bit more tension to a tense situation.
Divorces are really ugly when there are kids involves. Nothing gets nastier than a fight over child custody. Well, maybe the next fight over child support payments! Child support is such a touchy subject that even the IRS will not touch it. The agency apparently took one look at the subject and decided to avoid it all together. In tax terms, child support is neither taxable nor deductible.
If you are considering a divorce or in the middle of one, things can be stressful to say the least. Unfortunately, the IRS doesn’t really seem to care so make sure you understand their will be tax issues to deal with as well.
Richard A. Chapo is with BusinessTaxRecovery.com - providing information on
taxes.
