Texas couples who are divorcing or considering divorce might be concerned about the way the tax overhaul will impact alimony payments. As the effective date of the changes affecting alimony has been pushed back to the beginning of 2019, the pressure has been eased for some. However, couples that begin the divorce process or sign separation agreements in 2019 will be affected.
People considering divorce in Texas and across the country may be concerned about the impact of potential tax reform on spousal support and alimony. Alimony payments made to an ex-spouse following a divorce are currently tax-deductible by the payer and taxable income to the recipient.
When it comes to finances post-divorce, alimony and child support could have a big impact on the financial health of Texas residents. Even before reaching a support agreement, people who are divorcing need to consider how paying and receiving alimony and child support will affect them, including their taxes.
Television viewers in Texas who enjoyed David Hasselhoff's successful "Baywatch" series might assume that stars never have financial problems. Wealth and fame, however, often go hand in hand with costly divorces that impose hefty spousal support obligations, like the $21,000 a month Hasselhoff agreed to pay his ex-wife after they ended their 16-year marriage in 2006. The actor has now approached a court to end the payments entirely so that he can prepare financially for his retirement years.
A Texas couple that is going through a divorce or legal separation may have heard that the alimony is tax deductible. However, it is necessary that several conditions be in place for it to be so.
The outcome of a U.S. Tax Court case may impact the way Texas residents approach alimony payments. In order to qualify for an alimony deduction, said the court, money transferred to the ex-spouse must have been due under a legally-enforceable separation or divorce agreement. It is not enough simply to turn over the money.
Texas fans of Mary J. Blige may be aware that she filed for divorce from her husband, Martin Isaacs, in July 2016. The two had a prenuptial agreement that said neither would get spousal support in the event that they ended their marriage.
While the divorce process includes dividing property, and making decisions on child custody, one component that can cause much disagreement is whether a spouse should receive alimony or spousal support from the other spouse. Texas law outlines under what circumstances a spouse is eligible to receive alimony payments, how much the payments can be and how long they would receive the payments.
Spousal maintenance is often a part of a Texas divorce decree. Couples may not realize that alimony may affect their taxes depending on how it is referred to in the order. Alimony may be considered taxable income for the recipient, and it may be tax deductible by the payer.
Texas couples considering divorce may be interested in learning about the recent fate of the prenuptial agreement between a millionaire real estate agent and the immigrant wife he was sponsoring. In March 2011, the couple separated, and the two were divorced in 2012. However, the Ninth Circuit court said that the man must continue to provide support to his wife based on the I-864 Affidavit of Support that both parties agreed to.