Whats the news today-
Going through a divorce can be a very challenging time. While there is a significant personal stress and emotion that goes into a divorce, there is also a considerable legal challenge that all parties go through as well. When going through a divorce, all aspects of the divorce need to be considered including all financial and tax consequences. Those that are involved in a divorce will find that there are several tax consequences, tax credits, and deductions that need to be considered.
Some Incurred Legal Fees
The first item that can have a tax benefit is the deduction of some of your legal costs. When going through a legal divorce, you will incur some costs for consultation, litigation, and personal advice. In most cases, these costs are not tax deductible. However, you will be able to deduct costs that are directly related to trying to collect alimony or another taxable income.
In general, there is no limitation to the deductible amount. However, there are some requirements in order for the cost to be deductible. The first requirements is that the amount of alimony being sought must be a meaningful amount and be equal to at least 2% of the seeker’s personal AGI. Second, when deducting the legal costs, the costs associated with the collection of alimony must be clearly broken out from all other legal costs that are not deductible.
Alimony is a sum of money that one party of the divorce will pay to the other for a period of time. Alimony money that is paid by the payer will be completely tax deductible to he payer, without any limitation or income phase outs. Alimony money that is received by the other party will then be counted as normalized income.
Alimony money that is paid or received will be deductible only to the extent that it is contractual per the divorce agreement. If the payer opts to provide more money to their ex-spouse, the additional money will not come with any additional tax deduction. Furthermore, this money could then also be considered a gift, which can come with tax payment requirements for both the recipient and the payer.
In many cases of divorce, one party will have to spend other money to provide a standard of living to their spouse or family. This can include having to pay mortgage or rent on top of the alimony, paying child education costs beyond the age of 18, and other living expenses. Unless these expenses are specifically coded as alimony, they will not have a tax benefit of consequence for any party.
If the divorced party has any children, there will also be a significant amount of time discussing and negotiation how the costs of child care will be handled. In most cases, the party that earns more money will end up spending a sum of money on a monthly basis in the form of child support payments. The child support payments will vary considerably from one situation to the next and are a legal requirement for the payer to make on time. Child support payments are never tax deductible for the payer or considered taxable income for the recipient.
While child support payments do not have a tax consequence, there are still other child-related tax benefits to consider. All parents have the ability to claim an additional tax exemption and tax credit for each child that they have. Unfortunately, parents cannot split these exemptions and will need to figure out a plan for who gets to claim the exemption or credit. This part of the tax plan will typically be spelled out in the legal agreements as well.
Spodek Law Group have offered me excellent support and advice thru a very difficult time. I feel I've dealt with someone who truly cares and wants the best outcome for you and yours. I'm extremely grateful for all the help Spodek Law Group has offered me. I can't recommend them enough.
Spodek Law Group was incredibly professional and has given me the best advice I could wish for. They had been helpful and empathetic to my stressful situation. Would highly recommend Spodek Law Group to anyone I meet.
Best service I ever had. Todd is absolutely class personified. You are in the safest hands with spodek. They have their clients interest in mind.
Our divorce lawyers provide superior service, and results, with a white glove touch that few others can deliver.
555 W 5th St 35th floor, Los Angeles, CA 90013
35-37 36th St, 2nd Floor Astoria, NY 11106
85 Broad St 30th Floor, New York, NY 10004
195 Montague St., 14th Floor, Brooklyn, NY 11201