One issue that is often overlooked by those married individuals seeking a divorce in Pennsylvania is the tax consequences of paying and receiving alimony.
In Pennsylvania there are three kinds of spousal support; spousal support, APL (alimony pendente lite) and alimony. These three terms are sometimes used interchangeably and this leads to confusion. To be clear, spousal support is those monies paid/received while the married couple are separated but a divorce has not yet been filed with the court. APL is paid/received after the divorce has been filed and is intended to allow the lesser earning spouse to be able to proceed with litigation and to be on an equal footing with the spouse who makes more money. (It’s about fairness – if one spouse can afford to hire an attorney, the other spouse should be able to do so as well.) Alimony is those monies paid/received after the couple is officially divorced.
Getting back to the tax consequences, the person who is receiving spousal support, APL or alimony has to treat the amount of money they receive as income on their tax returns. Conversely, the person paying the spousal support, APL, or alimony is allowed to treat the money they have paid as a deduction on their tax returns.
If a court order for spousal support, APL, or alimony contains an amount for child supportthe entire amount of support that is received may be considered income for tax purposes (unless a court order explicitly says otherwise). Support orders that are solely for child support have tax no consequences- cannot be claimed as income, cannot be claimed as a deduction.
There are other tax consequences involved in the distribution of marital property and the dividing up of marital assets. It is important to speak not only with a tax consultant familiar with family law issues when preparing your taxes but to also consult with an experienced family law attorney while proceeding with your divorce. Our team of family law attorneys are experienced in dealing with these issues. Contact our office today to schedule an appointment to speak with one of our attorneys concerning the tax consequences of divorce.