Tax Issues in Divorce

Divorce brings about many changes in your life including many varying tax issues. This article will outline some of the more common tax issues you might expect to come across.

Boca Raton Alimony AttorneyAlimony

Alimony, as most people are aware, is generally tax deductible by the payer, and taxable to the payee or recipient. Alimony is defined as a payment to or for a spouse or former spouse under a divorce or separation instrument. Alimony does not include voluntary payments that are not made under a divorce or separation instrument.

What is a divorce or separation instrument? A divorce or separation instrument means:

  • A decree of divorce or separate maintenance or a written instrument incident to that decree,
  • A written separation agreement, or
  • A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory decree, and a decree of alimony pendente lite.
Not all payments are alimony

Alimony does not include the following:

  • Child support,
  • Non-cash property settlements,
  • Payments to keep up the payer’s property, or
  • Use of the payer’s property.
Alimony Requirements

In order for a payment to be classified as alimony, the spouses cannot file a joint return with each other and all the following requirements must be met:

  • The payment is in cash.
  • The instrument does not designate the payment as not alimony.
  • The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
  • There is no liability to make any payments in cash or property after the death of the recipient spouse.
  • The payment is not treated as child support.
Other common tax issues

Head of Household Filing Status: A person may be able to file as head of household if all of the following requirements are met:

  • The person is unmarried or considered unmarried on the last day of the year.
  • He or she is paid more than half the cost of keeping up a home for the year.
  • A “qualifying person” lived in the home for more than half the year except for temporary absences, such as school. However, if the “qualifying person” is a dependent parent, he or she does not have to live with that person.

Credit for Child and Dependent Care Expenses: If the person paid for the care of a qualifying individual so that person, or person’s spouse, if married, could work or look for work, he or she may be able to claim the child and dependent care credit. If married, both that person and his or her spouse must have current income, unless one spouse either was a full-time student five months of the tax year or who was physically or mentally incapable of self care. The credit is generally a percentage of the amount of work related child and dependent care expenses paid to a care provider. The percentage depends on the adjusted gross income.

The Earned Income Credit: The earned income tax credit, called the EITC or EIC, is a credit for certain people who don’t earn a high income. Tax Implications for Equitable Distribution

Generally speaking, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer is a result of a divorce. Tax Deductible Attorney’s Fees

Attorney’s fees and court costs are not deductible items on your tax return. However, legal fees which are paid in order to obtain tax advice or to obtain alimony may very well be tax-deductible.

This article points out just a few of the more common tax issues you might expect to find associated with your divorce case. There will be many, many more complicated tax issues involved in your divorce case if you have a business involved.

Contact a Fort Lauderdale Family Lawyer for Help

Divorce is never easy, though an experienced and dedicated family attorney can help walk you through every step of the process and make it as harmless as possible. Whether or not you and your spouse can come to an agreement out of court, it is always important to have a lawyer who will provide zealous representation. Alan R. Burton has extensive experience in all family law matters and is dedicated to protecting clients’ interests both in and out of court. Contact our office today for assistance at 954-295-9222.