Income Taxes

//Income Taxes

Income Taxes

As April 15 fast approaches most of us turn our thoughts to income taxes.  If you’re going through a divorce, it’s important to keep a few basic rules in mind.

Alimony is deductible by the spouse who pays it and includable as income by the spouse who receives it.  That means that the spouse who pays alimony, whether temporary or upon finalization of the divorce, can take a dollar for dollar deduction on his income tax return for all alimony paid during the tax year.  Conversely, the recipient must report every dollar of alimony he received as income on his income tax return.

These rules only apply if the payments are made pursuant to a written agreement, signed by both parties, or a court order or judgment.  Informal arrangements or oral agreements do not count.  Payments made informally are not deductible by the payor, nor includable by the
recipient. The payor pays the tax on those funds.

Another requirement for deductibility and includability to apply is that the payments must be paid to a spouse or former spouse and must terminate upon the death of either spouse or the remarriage of the recipient.

Child support payments cannot be deducted by the payor, nor are they includable as income by the recipient.  They are tax free payments for the support of one’s children.  The Internal Revenue Code provides that the parent with whom the children reside more than half the year (183 days or more) is entitled to claim the children as dependents on his income tax returns.  The parties can agree, however, that the non-custodial parent can claim them as dependents, but a Form 8332, signed by the primary custodian, must be included with the non-custodial parent’s income tax return.

Mortgage interest and property tax payments made during the applicable tax year are deductible.  Traditional IRA contributions made up through April 15 of the following year are deductible up to the applicable limit.  For 2016 the limit is $5,500.00 ($6,500.00 if you are 50 or older).

These are basic rules.  Tax law is complicated.  You should consult with a qualified tax attorney or accountant for advice specifically applicable to your particular circumstances.

By | 2017-06-01T15:07:46+00:00 April 17th, 2017|Taxes|Comments Off on Income Taxes