Of all the reasons and complications leading up to and then constantly intertwined with a divorce, money is often one of the most significant considerations. Some people get divorced over money, and some people only fight about money during the property division part of a divorce. For others, the main fight over money in a divorce occurs when it comes to determining whether or not child support or alimony will be paid – and how much. However, one thing that might not even be part of the back-and-forth between the divorcing couple, but that might have one of the biggest impacts on life going forward, is the tax implications of the couple’s newfound filing status.
Alimony, in particular, can be a new – and therefore unexpected – development for both of the former spouses when it comes time to file taxes for the first time in post-divorce life. As a recent article pointed out, the former spouse who receives the monthly payments will need to report the alimony as taxable income.
And, on the other side of the coin, the former spouse who pays the alimony gets to deduct those payments on their taxes. Either way, this financial support will affect both of the ex-spouses in post-divorce life for as long as the payments are required to be made.
As society progresses and more women are becoming professionals and income-makers, unlike years past, the issue of awarding alimony in a divorce is likely to become more difficult to decide. After all, an alimony agreement is intending in part to help the spouse who receives it maintain their standard of living while at the same time making use of the funds in order to get to a point where that ex-spouse can support themselves. If both spouses already have the education and skills they need to make a living, an alimony award would be hard to justify. But, it is important to remember that in the event alimony is awarded, the tax implications will need to be first and foremost in the minds of both parties.
Source: Chicago Tribune, “What’s even worse than a divorce? For some, it’s the taxes,” Lauren Young, April 10, 2014