When parties are negotiating and determining one’s alimony rights and obligations, the tax implications should not be overlooked, as spousal support will affect the taxes of both the payor and payee spouse. For the payor (the supporting spouse), alimony payments may be deducted from his or her gross income. Deducting alimony payments on your taxes is a big deal and can potentially save you a substantial amount of money. Likewise, for the payee, failure to report your alimony as income is a serious issue that may result in an audit or back tax obligations with penalties and interest. Unfortunately, there is often a disconnect between a party, the party’s attorney, and the party’s CPA (if they have one). If there isn’t someone in the chain that is looking out for both the legal and financial interests of the party, tax deductions for alimony can go unnoticed—and often the chance to deduct them is realized too late and the opportunity is missed. There is no reason why any party should neglect to write off alimony payments. A payor utilizing tax deductions for the payment of alimony does not affect the payee spouse’s financial security in any way—he or she will neither be harmed nor benefitted from this practice, so there is no reason why a payor should chose not to do so.
Prudent family law attorneys will look out for their clients beyond what’s in the immediate future, and make sure all bases are covered. If you decide to hire Brendle Law Firm for your Charlotte divorce case, you will be able to rest peacefully knowing that all aspects of your case will be handled competently, and that the implications of any settlement or order will be thoroughly explained to you. While some divorce attorneys may only tell you what you “need” or "want" to know, our attorneys will work diligently to set you on the right path for your future beyond the courthouse steps. As always, we encourage you to contact your tax advisor before making any major financial decisions.