If you divorced within the current calendar year, you may either pay or receive spousal support. Do you know how to report that on your federal and North Carolina taxes when tax season rolls around?
CNBC explains how to go about reporting spousal support. Keep yourself in the IRS’s good graces with the right info.
When you pay spousal support
Formerly, if you paid spousal support, you qualified for a tax deduction. Now, you have to pay income tax on the support you pay.
When you receive spousal support
In the past, the spouse receiving spousal support bore responsibility for paying taxes on that source of income. With the new tax laws in place, the receiving spouse does not have to worry about paying taxes for getting support.
Besides how much paying and receiving spouses owe (or do not owe) on their taxes, other factors require consideration. For instance, there are new limits on state and local income tax deductions. This change could make it more difficult for the spouse in the marital home to remain there. The more money now going toward state and local income taxes, the less money left over to maintain and upkeep the marital home.
In any case, if you finalized your divorce this year, you would do well to sit down with an accountant. Get an idea of what you can expect for the next tax season. Giving yourself as much time and warning as possible helps you avoid an unexpected tax bill or budgeting blunder.
This information is only intended to educate and should not be interpreted as legal advice.