Getting Divorced? Know About All The Associated Tax Deduction You Can Take
Getting a divorce can be an expensive process, but know that those costs will not necessarily cost you their face value. It's possible to benefit from some tax deductions because of a divorce, which could get you some of that money back.
Are you the one that is giving alimony payments to your former spouse? If so, know that you are able to deduct those alimony payments when filing your taxes. The main thing to know is that only court ordered alimony payments are considered a deduction on your taxes, and those payments must be made in cash. If you give your spouse something that is worth the value of the alimony payment, you cannot deduct it on your taxes. Additional payments that are not in the court order cannot be deducted either.
Be aware that there are requirements the IRS will expect of you when deducting alimony payments. For instance, those still living within the same home as their former spouse would not qualify for a tax deduction.
For those on the receiving end of alimony, you will have to claim that income as taxable income. Thankfully, you can also deduct any fees that are related to your alimony payments. For instance, if you met with a lawyer for an alimony hearing in court, then you can deduct legal fees related to your alimony. If you need to modify the alimony payment after the first agreement was made, those costs can be deducted as well.
Keep in mind that there are limitations on how big of a deduction you can take. In general, if the fees are less than 2% of your AGI (adjusted gross income) then you should be fine.
Tax Consultation Fees
Taxes will play a big part of a divorce, and chances are that you will be talking to your divorce lawyer about it at one point or another. Any time you talk to your lawyer about taxes, take note of it and determine what the billable cost is for their time. These consultations you receive about taxes can be considered a tax deduction as well. Just make sure that you are not including any billable hours towards your actual divorce, since those are not tax related.
For more information about tax deductions related to a divorce, you can speak with your lawyer about it or click to find out more here. After all, that time spent discussing it will be deductible in the end.