Under The Terms Of A Divorce Agreement Entered Into In 2017 Lanny

In the event of divorce, a spouse or former spouse may be legally required to make payments to the other party. Since these payments are often large, setting tax deductions has often been a major problem for the payer. Prior to the new Tax Cuts and Jobs Act (TCJA), payments that meet the tax definition of support could still be deducted from the payer for federal income tax purposes. And support recipients still had to report payments as taxable income. The payment obligation (with the exception of payment of overdue amounts) must end with the death of the beneficiary party. If the divorce documents are unclear as to whether or not payments will continue, the current state legislation will be checked. If, under state law, the payer must continue to make payments after the death of the beneficiary (to the beneficiary`s estate or beneficiaries), the payments may be non-deductible pensions. In other words, the payment obligation must end when the beneficiary party is dying in order for the payment to be considered deductible alimony. Failure to comply with this requirement for stop payments when the beneficiary is dying is the most common reason for lost food deductions. This TCJA treatment of maintenance applies to payments necessary under instruments of divorce or separation executed: (1) after 31 December 2018 or amended (2) after that date, where the amendment expressly states that the treatment of maintenance (non-deductible by the payer and non-taxable income for the beneficiary) now applies. The instrument of divorce or separation cannot stipulate that the payment in question is not alimony, nor can it in fact provide that it is not alimony, because it cannot be deductible by the payer or cannot be included in the gross income of the beneficiary. This treatment under the old legislation will continue for alimony under divorce agreements before 2019.

But for payments made under the post-2018 agreements, things will change dramatically. Here`s the story. Note that if a divorce agreement was entered into before January 1, 2019, there is no change in the income tax treatment of divorce-related payments (for example.B. alimony). Maintenance continues to be considered deductible expenses for the debtor where the old list of specific tax requirements applies. Thus, support payments can be amortized on payer`s 1040 IRS 2020 income tax return. As a result, there is no need to break down expenditure. The recipient of support payments for 2020 must list these payments as income on their 2020 tax return.

Whether you are separated or divorced, you have different effects on your taxes, including: there is no change in the federal tax treatment of divorce-related payments required by divorce agreements that will be executed before 2019. However, for these payments to be considered a deductible pension, payers must still comply with the old list of specific tax requirements. . . .

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