The Internal Revenue Service (IRS) changed how it handles alimony at the start of the year. Paying spouses can no longer take tax deductions for their payments. Recipient husbands and wives must now claim any monies that they receive as income. These changes have made it increasingly difficult for spouses to reach settlements in their divorces. This has motivated many couples to pursue different tax strategies in hopes of quickly settling their cases.
Divorcing spouses are increasingly looking to sell their homes as a way to quickly settle their cases. This is especially the case in jurisdictions in which couples lose their tax break when they split up. The property tax rate may be too high for the lower income-earning spouse to afford on their own if the value of the home is high. If that’s the case in your situation, then you and your spouse may benefit from agreeing to sell the home and split the proceeds.
Another option that you may want to pursue is funding a trust. A paying husband or wife who puts the alimony that they owe into a trust can eliminate or greatly reduce their tax burden. If the paying spouse is successful in convincing their ex to receive alimony via a grantor trust, then their recipient husband or wife will only have to pay taxes on the funds once they take a draw from it.
A third tax consideration that you should consider is how your earned income credit (EIC) is likely to decline or even disappear once you get divorced. This is likely to happen because only one parent is allowed to claim the EIC tax credit. A spouse ordered to pay child support may be able to convince their husband or wife to accept less each month if they can count on being able to claim the EIC benefit.
When you’re trying to negotiate a settlement in your divorce, the best thing that you can do is to sit down and speak with your attorney about the pros and cons of making certain financial choices versus others.
If you and your ex are having difficulty in reaching an agreement with each other, then you may also want to consult with an attorney in Fort Myers. They can advise you of how this form of alternative dispute resolution can help you reach a quicker settlement in your Florida divorce case.