Understanding alimony: How awards are taxed
Among the many factors that a court reviews to establish an alimony award, Florida law states that a judge will review the tax-related consequences for both parties as they will affect the financial standing of each.
In general, the party who provides the alimony award will be able to deduct that amount from his or her taxable income. The recipient, meanwhile, is legally required to report the support as taxable revenue. They will then have to pay the specified tax in a lump sum when filing their return. This setup is most common for divorce settlements in Florida.
In some settlements, two parties may stipulate that the alimony award will not have tax-based ramifications, in that the payer will not seek a tax deduction for the sum and the recipient will not include the award as a part of their taxable income. In this case, a Miami family lawyer will ensure that this arrangement is clearly stated in the divorce settlement.
In order to avoid tax-related complications, Forbes notes that both parties must appropriately represent their agreement when filing taxes, as any inconsistencies may lead to an audit from the IRS. “An audit is likely to be triggered if one party deducts “alimony” and the other does not include it in income,” the source states. As such, it is essential to keep detailed records of all payments and any related documents.
Whether you believe you are entitled to an alimony award, or are attempting to dispute your spouse’s claim to financial support, understanding the factors that play a role in this ruling is essential. An experienced Miami divorce lawyer like Scott A. Ferris, Esq. can help you navigate this area of law and put forward the best case for your future financial stability.