A divorce can have a lot of impacts on an individual’s income, especially alimony payer. The person receiving the money would benefit from an income that they have not worked for. The alimony tax reform has made things better for both parties. According to the 2017 tax reforms, alimony payments would no longer be taxable to both the payer and the receiver.
Here are some things you need to know about alimony and divorce.
Paying alimony is unavoidable
In the event where a couple chooses to get a divorce, there are many things involved. The first thing is the possibility of one of the spouses paying alimony to their partner. If the court decides that you should pay alimony, it means a deduction from your earnings. If you are the alimony’s receiver, it means you are getting an income. The amount paid varies from one couple to the other. The court of law is responsible for deciding the amount that should be paid. Therefore, before you think of getting a divorce, you should consider the possibility of having to pay alimony. Once the court has decided that you should pay this amount, there is nothing more you can do about it.
Divorce expenses are personal expenses
Before the tax law was implemented, couples could deduct divorce expenses such as legal fees from the alimony. The new tax laws consider diverse expenses to be personal expenses. Therefore, before an individual could file for a divorce, they should ensure that they have all the money required to cover the expenses. Such has made filing a divorce an expensive activity, especially for individuals that not have a large income. Regarding this fact, a substantial number of couples choose to work on their marriage instead of getting a divorce. The alimony tax reform has made a lot of changes in the divorce process as couples have to agree on how to pay the divorce expenses.
Tax credits instead of deductions
According to the new reforms, parents can no longer take dependency exemptions for their children. Before the reforms, parents could claim the dependency exemption for each of the children they supported. This could act as a tax reduction because it reduced the taxable income.
The good news is that those with children below the age of 17 years could claim a tax credit of $2000 for each child. A parent who is supporting a child that is more than 17 years could only claim a dependent credit of $500. The best part about a tax credit is that it reduces the tax you owe the state. However, a deduction reduces someone’s income, something which is less desirable than tax credits. The reform has brought a tax advantage to the parents paying child support.
How alimony is decided
The alimony amount is determined by the parent’s income. However, it is not always a guarantee that an individual’s income will remain constant. If the parent loses their job or gets a lower-paying job, they can file for a reduction of the alimony amount. The court can permanently reduce the alimony amount depending on your income. The supporting spouse is in a position to decide whether they should continue paying the alimony amount or not. If they have solid grounds to have the court reduce the amount, they will file for a case to allow the court to consider the request.
Filling a divorce might seem like an easy task to do. However, it is a tiresome process that involves financial and emotional strains. The couple ought to be prepared for these challenges before they decide on getting a divorce.