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If you are the party that may potentially be ordered to pay divorce alimony there will be some things that you want to make sure are included in any agreement or order that is issued in a divorce case. Because alimony is a way to "level" the playing field with regard to income and income potential between parties, it is usually based upon the disparity of both incomes or the potential of income. In most states, it is included in the alimony guidelines that the recipient's right to receive alimony or spousal support will be eliminated if the recipient chooses to cohabitate or remarry. Another consideration with regard to paying alimony is that alimony is treated like income, unlike child support. Child support payments neither have to be claimed for tax purposes, nor are they deductible. Alimony, however, is tax deductible. It may be of tax benefit to the payor, to term payments in the form of alimony because of this.
According to alimony laws, there are several types of alimony that may be awarded by a court to the recipient party. Alimony may be awarded on a permanent basis to the party with a large disparity of income. This type of alimony is usually payable for the remainder of the recipient's life, barring remarriage or co-habitiation, until the party's death. Another type of alimony is temporary, which is designed to help the recipient get on their feet, so to speak. This type of maintenance usually lasts one to two years. Another type of spousal support is a lump sum. This is obviously paid all at once which might affect the tax status of the recipient because again, alimony is taxable as well as tax deductible. The last type of alimony is rehabilitative support. This type of alimony is designed to aid a spouse that may be younger and eventually able to return to the work force. There may be a provision for continuing education for the recipient to aid in that effort. Again, no matter how alimony or spousal support is paid, it is all taxable for the recipient and tax deductible for the one ordered to pay it.
There are alimony guidelines used that can vary from state to state, with regard to calculating spousal support. One of the biggest factors a judge will take into account when making that determinaion is the disparity of income between the parties. Say, for example, the wife has been a stay at home mom for ten years or more while the husband has been the primary breadwinner. It would be obvious that the husband should more than likely be ordered to pay the wife some alimony or support during the transition period in her life of starting a new household. The guidelines will also most likely take into account her income producing capabilities as well, the ages of children, if any, and debt to income ratio of the parties.
Because of the tax advantages of labeling payments to a soon-to-be former spouse as alimony rather than child support, beware of the temptation to propose paying more alimony than would normally be ordered to take advantage of this benefit. The IRS has addressed this very issue and has some very strong words to say about either "front-loading" alimony or paying a large sum in alimony the first couple of years and having it taper off after that or simply paying excess alimony in general. The courts and IRS have said that because of the tax ramifications to the recipient, if the amount of alimony front loading or excessive alimony is more like a property settlement only benefitting the payor in excess proportions.
One consideration that needs to be made when a divorce action is filed is what amount, if any alimony or spousal support will be requested or offered. Alimony guildelines can very from state to state, but essentially is based upon length of marriage, income of the parties, difference in income of the parties and then of course will most likely be contingent upon co-habitation or remarriage of the party receiving the alimony. Another factor that will determine what, if any alimony is paid will be the amount of child support. The judge will take the amount of child support ordered into account when figuring spousal support.
|Sheri Ann Richerson|