Tax Season: Divorces, Alimony Payments, and Deductibles

Tax Season: Divorces, Alimony Payments, and Deductibles

It is the beginning of tax season and it can be very difficult to determine how to calculate your taxes if you recently were divorced from your spouse and you share children. Finances during a divorce can be hard to determine with the splicing and dicing that occurs during the division of property and assets, and confusion can set in regarding what exactly you need to claim and what you do not, as well as if there are any deductions that you deserve because of the contents of the divorce decree. There are so many nuances that a tax professional should review with you and your family, but the following could help you understand the basics for this year’s tax filing.

The When of the Divorce or Annulment

First, it is important to determine when you were married, and the timing will be different depending on whether you and your ex divorced or had the marriage annulled. December 31, 2014, is the cut off date, so if you were married up until then, you and your ex could still file jointly and enjoy the marriage tax bonus. If you ended up annulling the marriage rather than divorcing, it has the legal effect of voiding the marriage and it is as if the marriage never happened; the couple that annulled cannot file joint returns.

Claiming Dependents and their Associated Costs

Second, it is important to identify who is claiming the children (if there are any) as dependents. Usually, that can be determined according to the custody arrangement and through the divorce decree. Also if one of the parents pays for the children’s medical expenses, then he or she may claim them on their tax forms.

Spousal Maintenance and Child Support

Spousal maintenance is also a taxable event. If you receive spousal maintenance (or alimony) then you pay the taxes on the received “income.” If you are the one paying alimony to your spouse, then you can usually claim a deduction. Child support is not considered a taxable event.

Different Alimony Awards in South Carolina

In South Carolina, alimony payments are paid out in a few different ways. The following are the different types of alimony payments in South Carolina:

Periodic alimony is paid in periodic installments for a period of time. This type of alimony reflects the circumstances of each spouse and attempts to help the receiver of the periodic alimony to adjust to their new single lifestyle without a second income. The award may be adjusted based on changed circumstances and can be terminated based on the cohabitation and/or remarriage of the spouse. It also could be terminated as a result of the death of the receiving spouse.

Lump sum alimony is a set amount of support that is paid at once or within a few installments. After the court has ordered the set amount, that amount cannot be changed.

Reimbursement alimony is paid out to the spouse who financially supported the other spouse while he or she received some sort of specialized training or education that added to the overall earning capacity. This would be in the circumstance where one spouse might have supported his or her spouse while he or she pursued an educational degree, which ultimately contributed to his or her future earning capacity. The payments can be made in one lump sum or in installments.

Finally, a couple that separates but does not divorce may still receive separation periodic payments, but the payments dissolve when the couple reunites and cohabits, the supported spouse dies, the couple finally settles with a divorce, and/or the couple has a changed circumstance such as increased earning capacity or a new relationship.

The family court may order the tax implications of the abovementioned alimony plans and determine the right to claim dependents and their associated costs.

Experienced Family Law Attorneys in Mount Pleasant, Charleston Area

Tax and alimony issues are extremely complex and difficult. It is important to consult with an experienced family law attorney like the attorneys at Klok Family Law LLC. Contact Klok Family Law LLC today for an initial and confidential consultation.