Income tax considerations for divorcing spouses

Disputes over property division and spousal support are not uncommon for divorcing couples in Pennsylvania and around the country, but approaching negotiations with clear and realistic goals can sometimes reduce tension and conflict and lead to a more amicable outcome. Spouses sometimes agree to give up their claims to assets such as stocks and bonds, furniture or artwork in return for higher alimony payments, but they should bear in mind that such arrangements can have consequences when it comes time to file their income tax returns.

Divorced or legally separated spouses who pay alimony in cash or by check or money order may deduct these payments when filing their income tax returns, and spouses who receive maintenance payments must generally pay tax on this income. These tax rules do not apply if the spouses concerned are members of the same household or still filing a joint return. Child support payments are never deductible, and parents receiving child support are not required to pay income tax on this money.

Understanding these rules can sometimes make divorce negotiations less stressful. Spouses who expect to pay alimony usually earn more and pay taxes at higher rates than the recipients, and deductions may be more valuable to them in the long run than a coveted asset. Spouses who expect to receive alimony could value the peace of mind that a secure source of income brings, and they may be less truculent during negotiations as a result.

Experienced family law attorneys will likely seek to avoid conflicts and confrontations whenever possible. They may point out to their clients that protracted legal battles can be both damaging and expensive while providing no guarantees, and they may suggest alternative means of dispute resolution such as divorce mediation or arbitration.

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