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Divorce and taxes

| Oct 25, 2016 | Divorce |

All the details appear to be worked out and agreements have been reached. On the surface, it appears that everything with a Connecticut divorce has been taken care of. However, when it comes to alimony and taxes, there can still be some sticking points.

Sometimes, alimony is a tax deduction for the payor and a taxable item for the payee. Other times, alimony is not taxed. While this can be confusing, it all comes down to how alimony is classified in the final divorce decree while taking into account current IRS regulations. The decree should specifically state whether the funds are to be treated as taxable alimony. Exactly how the funds are legally regarded will dictate any tax obligations for each party. 

Another confusing area for some individuals has to do with charitable contributions. If the payor makes a charitable contribution on behalf of the payee rather than giving the money directly to that individual, it is possible that the payor can claim this as a tax deduction. It is also possible that the payee may be liable for taxes on this amount. This particular situation was recently highlighted when Johnny Depp made charitable contributions in the amount of approximately $7 million on behalf of Amber Heard. It is now possible that he will reap the tax deductible benefits and she may owe taxes on the $7 million.

Taxes and divorce are often confusing topics for most Connecticut individuals. The manner in which specific details are handled can greatly affect one’s financial position. For this reason, it is advisable to discuss the situation with experienced legal counsel prior to making any final decisions.

Source: time.com, “Johnny Depp, Amber Heard, and Your Divorce”, Lili A. Vasileff, Oct. 19, 2016

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