Getting divorced may cause some emotional discomfort, but a person who is divorced may also feel the financial sting of the outcome of the divorce proceeding. An individual who has to pay alimony or child support in Georgia, for instance, will have to budget for this expense each month. Moreover, the party who receives alimony following a divorce will lose some money in the process in the form of income taxes.
With tax time around the corner, understanding how alimony and child support money are handled by the Internal Revenue Service can be very helpful. Alimony is taxable in the year that a person gets it, so the individual who received alimony in 2013 will have to account for it on their 2014 income tax return. The same rule applies for separate maintenance payments and other types of payments that a person may receive from an ex-spouse.
Child support money received, on the other hand, is not taxable to the recipient. When dealing with taxes that are related to alimony, it is typically wise to pay taxes on the alimony by using estimated filings during the year in which the payments are received. This eliminates the stress of receiving a whopping tax bill in April of the following year. In addition, it is worth noting that the person who pays alimony to a former spouse receives the benefit of being able to deduct those amounts from his or her taxes.
A Georgia divorce can certainly yield a few financial surprises, particularly if a judge has to make decisions regarding asset division or spousal support for a couple who can’t seem to find common ground on such matters. However, financial surprises can also come if the recipient of the alimony isn’t prepared for the tax bill attached to it. Understanding the laws on spousal support and other divorce-related matters can help a person to pursue his or her best financial interests and hopefully emerge from the divorce as satisfied and prepared for the future as possible.
Source: nasdaq.com, Beware These 5 Terrible Tax Surprises, Kay Bell, Jan. 8, 2014