Going through a divorce is tough enough without having to worry about all the tax implications that may come with it. As soon as you think you have it all together, the rules change and you start all over again. But don't fret. Laveniir keeps up with all the latest news on this type of tax filing and can walk you through it with ease.
In the 2019 tax year, the rules for reporting alimony income on your tax return changed. Now, paying alimony is no longer tax-deductible and receiving alimony is not taxable as income for any divorce after December 31, 2018. The Tax Cuts and Jobs Act cut the alimony code from 2019 through 2025. However, taxpayers may still claim the deduction and must still report the payments for most divorces before December 31, 2018.
To qualify for the alimony deductions, these things must apply:
- Payments must be made in cash, not real estate.
- A spouse—or designee—must receive the payment under a divorce or separation instrument.
- The following cannot be excluded as payment: included in the recipient's income, deducted by the payor spouse.
- The spouses must live in different households when the payment is made if they are divorced or legally separated.
- Payment liability must end upon the death of either spouse.
According to the Internal Revenue Service (IRS), alimony includes what is sometimes called "separate maintenance"—income received if you were legally separated but not technically divorced yet. It does not include:
- Child support
- Noncash property settlements
- Use of the payer's property
- Voluntary payments that aren't required by the divorce decree or agreement
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The Alimony Recapture Rule
- The Internal Revenue Service reserves the right to "recapture" your deductions if it determines that the payments you made don't qualify as alimony. This means that the amount of alimony you deducted must be added back to your income in future tax years, at which time it becomes taxable.
- Wo learn more, see Publication 504: Divorced or Separated Individuals at www.irs.gov. Then, contact Laveniir at www.Laveniir.com and set your appointment for a free consultation.
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We Have Secrets to Share With You: View Our Virtual Workshop
Do you want to know the secrets of the tax refund? Well, you'll have to watch Laveniir's tax workshop to find out. Tune in on Facebook to listen to expert tips on how to maximize your refund. This workshop is for anyone who has to file this year: employees, entrepreneurs, small business owners. Don't miss it!
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