Are there Tax Consequences for Alimony in Florida?
Initially, Alimony in Florida is regarded as taxable income to the recipient and a deduction to the payor. However, As of January 1, 2019, the alimony tax deduction ceased. This means that the Alimony paid will no longer be taxable to the recipient and deductible to the payor starting from January 1, 2019.
The spouse paying the Alimony will no longer receive an off-the-top deduction. That is, Alimony will become more expensive to the spouse paying it. Conversely, it will no longer be regarded as income to the benefiting spouse.
This new tax law significantly impacted how divorce cases are recently handled in Florida as the tax was previously utilized by the spouse paying the Alimony to gain tax advantage before the new law.
Are there tax consequences for Alimony due to this change in alimony law? What are the tax consequences for Alimony? Read on to learn more.
The General tax consequences of Alimony in Florida
Some of the tax consequences of Alimony in Florida include the following;
- The payor can deduct the amount of Alimony paid from tax. Similarly, the recipient must include the amount of Alimony to income for taxation purposes. Let us have a hypothetical scenario; Felix was ordered to pay Joy, his ex-wife alimony of $1000 every month, making a total of $12,000 annually, and he has a yearly income of $24,000.
When Felix files his tax, he can deduct $12,000 alimony from his income, and he is then taxed on the remaining $12,000.
Joy has an annual income of $6000. she will add the Alimony she will receive to her annual income and then tax on the total. Joy will add the total of $12,000, annual alimony earnings, to her actual come, making a total of $18,000. She will then be a tax on $18,000
- The consequence of child support alimony in Florida differs from those mentioned above. Here, the payor cannot deduct the child support alimony from the tax; likewise, the recipient cannot include child support in income.
Wrapping Up
Some critics believe that it is now tricky for partners to get a divorce with the new law, as it is believed that the party paying the higher tax due to Alimony will be unwilling to pay and sign a divorce.
If you are concerned about how the new law affects you, do not worry more. Contact a Family Law Attorney for legal advice on how tax consequences will affect you.