Tax Implications of Alimony in New Jersey
Currently, alimony payments are deductible for payors and taxable for the recipient absent an agreement to the contrary. A person could put in the default is that it is going to be deductible for the payor.
To learn more about the tax implications of alimony in New Jersey, contact a skilled alimony and spousal support attorney right away.Types of Payments and Agreements
If the parties have come to an agreement saying that it is going to be non-taxable for the recipient, the parties can agree to that, too, but there are tax consequences for that. The alimony the recipient receives is technically considered income. It will be included in a recipient's income even though it is not earned income.
There is currently a proposed tax change offered by this current administration that eliminates the tax-deductibility of alimony payments. It has had a huge effect on current alimony negotiations because the taxation is in a state of limbo.Importance of Understanding Taxes
In terms of alimony, the amount that one receives, the length of the term and who receives the tax burden are all important considerations because both parties are re-establishing themselves without the financial implications of the other party. Tax implications of alimony in New Jersey could include any scenario where one party is trying to re-establish themselves financially.
They need to understand whether or not the deduction is going to be to more beneficial to them or to the other party and whether or not they are going to get something else in terms of the equitable distribution or the global settlement if they give up the tax benefit. These are all things that should be considered and understood by the family law attorney and by the litigant going through the process to make sure they receive the benefit of their burden.Can Alimony be Tax-Deductible?
In terms of one person paying and one person receiving the money, if the person paying is deductible from their taxable income, if the person's receiving it added to their taxable income, so, just as a bottom line issue with regards to the taxes.Lump Sum Payments
Lump sum is the amount or type of payment that could contribute to how tax implications of alimony in New Jersey are handled in someone's case. When a person is receiving a lump sum, they understand it is for alimony or it is written into the marital settlement agreement, and the typical lump sum are tax-affected.
A person would take the tax consequence that the recipient spouse would be receiving and affect it over the obligation. Depending on the tax bracket, instead of receiving $100,000, a person is now receiving $70,000. A person would have to also note that it is a lump sum alimony buyout and not just the distribution of some other funds that the parties had together.Defining Equalize Distribution of the Couple's Assets
In terms of alimony, there are 14 factors, not just the bank account, or the stocks, or any other assets that the parties have. The court looks at the actual need and the ability of the parties to pay, the duration of the marriage, the age, physical and emotional health of the parties, et cetera. In terms of equalizing the distribution of couple's assets, it comes down to equitable distribution.
While the parties are typically trying to come to a global settlement to resolve all issues, a lot of times, they can resolve alimony and then move on just to equitable distribution. A lot of the time, equitable distribution depends on what assets the parties have.