As tax season is quickly approaching, there is a lot for divorcing couples in New York to think about and consider. After all, certain aspects of a divorce settlement can affect one's tax filing. Paying or receiving alimony, in particular, can make a big difference on one's taxable income.
Alimony can be a wonderful benefit for those who are in need of the financial support post-divorce. Something to think about, however, is that alimony is considered taxable income. If recipients are not careful and fail to plan accordingly, they could end up having to pay a large chunk in taxes come April. Unlike a typical paycheck in which taxes are withheld by one's employer, alimony recipients are required to withhold taxes on their own and either make a lump sum payment or estimated payments throughout the year.
Spouses who are ordered to pay alimony actually have an advantage when it comes to their taxes. While alimony recipients must count the support as income, payers have the ability to use it as a deduction, reducing their taxable income. There are some stipulations to this, but overall it is a good benefit if forced to provide financially for a former spouse.
When it comes to alimony, the tax advantages and disadvantages are rarely thought of or discussed. While it may not change a person's mind about pursing this benefit as part of his or her divorce settlement, it is a good thing to be aware of so there is not a big surprise come tax time. Divorcing couples in New York can turn to an experienced family law attorney in order to get more information about this and other concerns that may accompany receiving or paying spousal support.
Source: finance.yahoo.com, "How alimony affects taxes for you and your ex", Kay Bell, Feb. 10, 2017