When a couple separates or divorces, sometimes a court will require that alimony be paid to either party in the matter, usually the person who makes less money. Alimony is a specified amount of money that is required to be paid to a husband or wife on behalf of their partner as part of their divorce or separation agreement. Failure to abide by this agreement could result in serious penalties. Although alimony has been awarded to husbands and wives for many years in divorce cases, there have been some changes made to how alimony is reported to the Internal Revenue Service (IRS).
What are these changes exactly?Well, if you are currently receiving alimony or are in the middle of a divorce in which alimony is likely to be awarded, below we break down what modifications have been made in terms of how you will report these payments to the IRS.
- Under the 2017 Tax Act, the “Internal Revenue Code (IRC) will allow a spouse who pays alimony to take a deduction on his or her income taxes for the amount of alimony that he or she actually pays” from now up until January 1, 2019. In order for the alimony payment to be considered as a deductible it must meet the following criteria:
- The payment must be made in cash.
- The payment must be made pursuant to a divorce decree or separation agreement. This means that if the payment was made voluntarily, it would not qualify as a deductible.
- The payments must terminate no later than the death of the Payee Spouse (the person who receives alimony).
- The payment cannot be designated as a property settlement for child support payment.
- The spouses cannot be members of the same household when the payment is made.
- The spouse who receives alimony must report the actual amount received as income on his or her tax return.
[Source: American Bar Association].
Now, if you enter into a divorce decree after December 31, 2018, the alimony deduction is eliminated. For divorces that are filed after this date, the Payor Spouse (which is the party who pays the alimony) will no longer be entitled to a deduction and the Payee Spouse is not required to claim the payment as income. Many divorce experts believe this could lead to tougher negotiations for couples going through a divorce as it will lead to less spousal support as more cash goes to taxes instead, according to U.S. News.
There are a few other changes that have been made to how alimony is recorded with the IRS and the Birmingham, AL family law attorneys at The Zwiebel Law Firm, LLC would be more than happy to sit down with you and review what these changes are. In fact, the skilled team of lawyers at this firm can provide you with information on the divorce process, child custody, child support, and more.
So, if you are going through a divorce and need some legal advice or are simply looking to retain a divorce attorney located in Birmingham to represent you throughout the duration of your case, The Zwiebel Law Firm, LLC is the firm you want to place your trust in.
You can reach The Zwiebel Law Firm, LLC at:
826 Columbiana Road
Birmingham, AL 35209