If you're a high-asset individual and you're going through a divorce, you may find yourself asking questions you've never considered before. That's because you know your finances are going to change drastically after property division is all said and done. You may even be required to pay alimony. All of these changes can add up, affecting one major thing in the process: your tax filing.
Even though tax season is over, it's not a bad idea to consider future tax filings now, especially if you're getting ready to dissolve your marriage. The choices you make during divorce proceedings, particularly in regards to support payments, can change how you file taxes down the road. This brings us to today's question:
How will an alimony request affect my taxes?
Alimony, also referred to as spousal support or spousal maintenance, is defined by the Internal Revenue Service as a payment made by one spouse to a former spouse as part of a divorce or separation decree. The payment is intended to provide financial support to the recipient spouse for either a set period of time following the dissolution of marriage or for the rest of the recipient's life.
Because alimony payments are considered income, the IRS requires paying spouses and recipient spouses to claim them on their taxes. A paying spouse is allowed to deduct the amount paid in alimony from their income while a recipient spouse is required to include the amount as income.
Whether you're paying alimony or receiving it, alimony payments can affect your tax bracket, either requiring you to pay more or less depending on whether the payments push you over or below the tax thresholds.
As you can imagine, this is something you'll want to consider and discuss with a seasoned family law attorney prior to finalizing your divorce. That way you won't be blindsided by it when you file your taxes in the year in which your divorce is finalized.