alimony

Tax consequences of divorce: Alimony

Alimony

For those who may be on the hook for on-going alimony payments, the word "alimony" may seem like a dirty word. However, many overlook the tax benefit of classifying payments as "alimony" versus something different, such as a property distribution.

Alimony is currently considered a taxable event meaning the recipient of the alimony is receiving taxable income. The alimony as paid is tax-deductible to the paying party, provided the settlement agreement does not state otherwise. This has been in the tax code since 1942.

But buyer beware! Tax changes are on the horizon. "Because of the new tax law, spouses paying alimony won’t be able to take a deduction while spouses receiving alimony will no longer have to report it as income..." reports the American Bar Association. Come 2019, alimony will no longer be a taxable event, which means no more tax deduction and more money flowing to the government due to the payers of alimony mostly being part of higher tax brackets.

Source: http://www.abajournal.com/news/article/new_tax_law_affects_alimony_could_spur_divorce_surge/

This blog post is not intended to provide readers with legal advice or tax advice in any way. This does not create a legal relationship or agreement between the reader and Bouchard Law, P.A. Bouchard Law, P.A. and its attorneys and staff do not claim to be experts in tax matters.  Bouchard Law, P.A. recommends consulting a tax professional to fully evaluate your tax implications and consequences of your particular position.

 

Why your case is probably not an "uncontested" divorce.

I often have folks visit me and state their case is an "uncontested" simplified divorce. I tell them it probably is not.

What exactly qualifies as simplified under Florida law? 

Generally, most divorces are contested one way or other. Simplified divorce involves no children, no alimony or spousal support, and, generally, no conflict whatsoever. The parties go to the Clerk of Court to jointly file the Petition for Simplified Dissolution. Most of these cases do not involve lawyers. Our firm finds that a simplified proceeding is a useful tool when the parties have not been married long and they do not own any assets nor have any joint liabilities (financial debts). The parties are not required to have financial disclosure, but are required to attend a final hearing. The parties also give up their right to a trial and the opportunity to examine/cross-exam the other parties and witnesses.

From the Florida Bar Consumer Pamphlet: Divorce in Florida

Not everyone can use the simplified procedure. Couples can use the simplified dissolution of marriage only if all the following requirements are met: 

· Both parties agree to the use of this form of dissolution proceeding.
· They have no minor (under 18) or dependent children.
· They have no adopted children under the age of 18.
· Neither party is pregnant.
· At least one of the parties has lived in Florida for the past six months.
· The parties have agreed on the division of all of their property (assets) and obligations (debts).
· Neither party is seeking alimony.
· Both parties agree that the marriage is irretrievably broken. 


If you and your spouse cannot meet all of the above requirements, you will have to follow the procedure of the regular dissolution of marriage process.

Where people run into problems when filing a simplified dissolution is when they fail to recognize and address their legal needs and rights thoroughly. For example, parties fail to recognize that pets are considered personal property under Florida law. If the parties do not address who retains the pet upon a simplified dissolution, generally, the pro se (the Clerk-provided, do-it-yourself) marital settlement agreement provides that personal property will stay with the person it is currently with. Then, later on, you'll find yourself in small claims court attempting to resolve the issue of who gets the dog, which should have been resolved via your divorce. Other issues that people fail to address involve changing titles/registrations on vehicles, relinquishing their property rights in homes and land, health insurance/care needs, and other types of support.

If you have questions about your case, give us a call at (941) 764-1146 to schedule a free consultation.