Alimony is a confusing subject for most people going through a Massachusetts divorce. Few understand how it is awarded, how much and for how long. Another aspect of alimony that catches many by surprise is the important impact it can have on your taxes, whether you are the one receiving or the one paying the alimony. To learn more about the interplay between alimony and taxes, keep reading.
Alimony’s Impact on the Payer
Though it is certainly no fun to make alimony payments every month, the good news is that the person paying the spousal support is entitled to a tax deduction. Alimony payments are subtracted from the taxpayer’s income when it comes time to pay. To reduce your taxable income, you must simply report your former spouse’s Social Security number. However, it’s important to note that the same rules do not apply to child support. Child support is not viewed as taxable income, and it cannot be deducted from the person making the payments.
Alimony’s Impact on the Receiver
You may have guessed that if the person making the payments gets a deduction, someone is going to be left to foot the bill. The spouse receiving alimony payments needs to understand that the money is taxable as income in the year in which it is received. Also, because you are receiving that money without taxes being withheld, you may want to consider paying estimated tax payments to avoid being left with a huge bill come tax time.
Should you have questions regarding your rights and responsibilities during a Massachusetts divorce, contact the Law Offices of Renee Lazar either through email or telephone 978-844-5095 to schedule a Free one hour no obligation consultation.