Anyone who pays or receives alimony following a divorce in Greenville, SC should know the tax implications. In the past, when a person received alimony, they had to file it in their taxes as extra income. Keep in mind that this was only applicable to alimony and not child support. On the other hand, the person who paid alimony was able to claim these alimony payments as deductible on their taxes. In addition, both parties were legally obligated to file separate tax returns as a prerequisite for any alimony rearrangements.
In some cases, the spouse supposed to make the alimony payments concentrated the payments in the first one or two years after the divorce. The IRS often considered this money as a part of a non-deductible property settlement. And in other cases, if the alimony was scheduled to terminate within 6 months of a child’s 18th or 21st birthday, the IRS would deem this alimony to be disguised as child support.
As a general rule, alimony payments must be declared as income. The alimony is discontinued upon death. After a divorce, it is mandated that you and your ex-partner do not reside together. In addition, alimony payments should never be disguised as non-taxable or as child support.
Changes and New Laws
While this was the way to handle alimony payments traditionally for taxes but in 2019, the government may make some changes. The government is well aware of how some people avoid paying taxes by making deductible claims. In 2019, there may be changes to what one can deduct and what one cannot. This new federal tax code is the ‘divorce penalty.’
Starting in 2019, the new tax formula for divorced people is going to change in terms of what they can deduct. These changes may bring in an extra $6.9 billion over ten years for the federal government.
Under the current taxation system, the deductions made by the divorcing couple was costing the federal government more than the tax payments it was receiving from the recipients. In addition, the IRS has been claiming for many decades that there are many more tax filers claiming deductions for alimony than there are tax filers who pay tax after receiving alimony. This is the disconnect the government hopes to end with the new regulations.
Under the new rules, alimony will no longer be tax deductible for the spouse making the payments. In addition, for the recipient, the alimony will be tax-free income. What this means is the spouse in the higher tax bracket will be the one who most likely owes the IRS.
What all this means is that paying alimony is going to be an even more expensive affair after 2018. More important for the spouse receiving the alimony, this money will not be taxable income and will go much further towards taking care of expenses.
Greenville Family Law, Your Family Lawyer in Greenville, SC
If you have questions regarding your tax returns and how you should deal with alimony payments when filing your return for 2018, call the Greenville Family Law office today and one of our family law attorneys in Greenville, SC will be happy to assist you. Keep in mind that the regulations may change as of 2019. So, next year’s return and alimony payments will be handled differently. For more information, call our legal team today. They will guide you through the process of filing your returns properly. Remember, it is a crime to hide any income, and as of 2018, alimony payments must be declared. Whether it’s this year’s tax returns or next year’s, call us today.
However, there are legitimate ways of saving up on your taxes when filing your taxes after your divorce. Let us help you figure out how you can save and how you can minimize your outstanding tax payments. Our family lawyers will inform you of any legitimate deductibles you might have.
Greenville Family Law has been providing legal services for many years in Greenville, SC. We are your go-to family lawyers. Call us now, and we will be happy to connect you to the right family law attorney.