The person making the spousal support payments will be utilizing the spousal support for purposes of getting deductions on annual tax liability. On the contrary, the person receiving spousal support will be paying additional taxes because the spousal support will be considered taxable income.
To determine the effect of Virginia spousal support on your taxes, it is important to consult with a knowledgeable alimony lawyer as soon as possible. An experienced attorney can help determine the elements of your case while helping to produce the best outcome on your behalf.
Equalizing Distribution of Assets
When equalizing assets in Virginia, often times, the tool used by parties in negotiations or by judges in court is called a “monetary award”. Under Virginia law, the court has the authority to order a monetary award from one spouse to the other and, oftentimes, the court will utilize this to equalize the assets.
For example, if the parties have real estate, and the court decides that one of the spouses is going to keep that and the equity existing in that asset is $300,000, then the court may award a $150,000 monetary award to the spouse who does not keep the house in order to equalize the assets. These elements should be disclosed when determining how an individual’s taxes are affected by Virginia spousal support.
Elements of the Decision
In cases where neither party can afford to keep an item of property that has high value, (usually this would be real estate), the court is typically going to order the assets to be sold to liquidate and more easily divide the proceeds.
However, there are some cases where one party or the other can afford to keep a high-valued asset such as a home, and either pay from assets or increase the mortgage to cash out money to make that monetary award to the other spouse as ordered by the judge. The judge will not take such an action if the parties are not able to sustain it.
Cash payments that are made to a third party on behalf of a spouse or a former spouse can qualify as alimony if they are made at the direction of the spouse, including as part of an agreement or a court order, and there is language specifying that this payment to a third party is to be treated as spousal support.
These payments would be included within the language of the contract, otherwise, it is possible to do it so long as the parties have something in writing indicating that such the spousal support payment is considered to have been made. The determination in writing can help an individual considerably when determining the effect of such alimony on their Virginia taxes.
Contacting an Attorney
Whenever there is a client who is the potential recipient or payor of alimony, it is recommended that they discuss the tax implications with a tax attorney and an accountant, because tax regulations can be very complicated and the rules change.
To determine exactly how spousal support payments in Virginia can affect your taxes, consult with an attorney as soon as possible.