Often divorce decrees or separation agreements describe the nature and amount of payments and transfers to be made between divorcing individuals. Having payments structured as alimony can be an effective tax planning tool in this process. Why? Because it is deductible by the payer, which is typically the higher earning spouse and taxable to the recipient, thus reducing the former family units overall tax burden. However, sometimes payments the parties identified as alimony turn out to be something else. This blog series looks at some of the ways in which alimony can be reclassified.
First, the basics. In order to be …read more
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