How adjustments in divorce and alimony taxes can have an effect on you

Divorce, whether we like it or not, is a part of life for many. Granted, researchers find it difficult to pinpoint the exact number of marriages that end in divorce. However, the latest figures from the Centers for Disease Control and Prevention (CDC) show that around 45% of marriages were divorced in 2018. Although the number has decreased significantly in recent years, the fact remains: divorce is a part of life for many people, and it is important to consider changes in alimony and divorce tax laws to understand the implications of divorce can your taxes.

As the CEO of a tax filing app company, I know exactly how important it is to stay up to date on new developments in tax laws – especially those that could potentially affect anyone.

A divorce is officially defined as the legal termination of a marriage that has been recognized by the court in legal proceedings. For the IRS, your marital status on December 31st is your marital status for the entire tax year. If your divorce is not finalized by December 31st, you will continue to be considered married for that tax year. Conversely, if you have been married all year and your divorce finalized on December 31st, you will be deemed divorced by the IRS for that tax year. It doesn’t matter if you are legally separated or live separately – the IRS will consider the legal definition of divorce for tax purposes only. I’ve found that one of the best rules of thumb when dealing with taxes is to keep an eye on the dates for large milestones for this very reason.

Child support is where things get a little more complicated because the laws regarding child support and child support have changed recently. Alimony refers to judicial payments to a spouse or ex-spouse under the separation or divorce arrangement.

Due to the Law on Tax Reductions and Employment, maintenance payments are no longer tax deductible from the 2019 tax year. Likewise, the recipient is no longer obliged to report this as income.

The new law affects divorce settlements and alimony, which were concluded in 2019. If your divorce was finalized on or before December 31, 2018 and / or your maintenance payments were established, your maintenance payments will not be affected. They remain tax deductible and the recipient must show them as income from their taxes.

Payments must correspond to the tax law definition of maintenance payments, which must be taken into account under the new law. This means that they:

• A written instrument request.

• Paid on behalf of the spouse or ex-spouse.

• Expressly stated as maintenance.

• Cash (or cash equivalent payment method).

Likewise, the payment cannot:

• Count as child benefit.

• Proceed after the recipient dies.

After all, the two parties involved in maintenance payments cannot live in the same household.

Depending on state and local laws or the individual judge’s procedure, the details of alimony will vary from case to case. However, tax laws are dealt with at the federal level, so these changes apply in most cases. These maintenance laws remain in place, so it’s important to keep an eye on the details whether or not you will be needing maintenance soon.

The information provided here is not investment, tax or financial advice. You should contact a licensed professional for advice on your specific situation.

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