Separation and divorce will impact your tax situation. Questions will abound as to filing status, dependency exemptions, and liability for tax issues. Should you file jointly? Is a written agreement as to taxes necessary? How do tax issues intersect with support payments? What tax issues will arise with the transfer of marital assets?
Taxpayers must file taxes and claim income and deductions pursuant to IRS regulations. However, there remains much room for maneuvering and many issues upon which separating spouses will need to agree. Typically, if court intervention is required, the court will require that parties file their taxes in a manner that maximizes the total income available to the family. When entering support orders, the court must consider tax consequences, as the net amount available to the person receiving support, as well as the after-tax cost to the person paying, can vary greatly depending upon the structure of the payments. Generally, spousal support payments, whether they are called support or alimony, are treated as taxable income to the person receiving them and deductible to the person paying them; in contrast, child support payments are neither taxable income nor deductible.
It is important to note that, under federal tax law, spousal support and alimony payments must be properly structured to qualify for deductibility to the person paying. Payments to a spouse for support or alimony do not automatically qualify, even when court ordered. You may depend on our expertise to ensure that your tax issues are resolved in the most advantageous manner to you.
To learn more about what Wilder Mahood McKinley & Oglesby can do to resolve your tax issues, contact us online or call our office in Pittsburgh, Pennsylvania, at 412-261-4040.