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The impact of alimony on personal finances

On Behalf of | Dec 2, 2020 | Divorce |

The financial impact of divorce creates an immediate need for you to reassess your future and begin planning right away. Court-ordered child support or alimony payments may create a new dynamic that you need to factor into your financial planning.

Alimony provides ongoing financial support, usually for the person who primarily stayed at home to manage the household.

Budgeting, payments and taxes

One way that you can minimize the impact of alimony on your finances is to work payments into your monthly budget. Because alimony is a court-ordered requirement, you would benefit from making consistent payments in a timely manner. While there may not be any immediate repercussions to unpaid alimony, if you refuse to pay and have notable delinquent payments you may face criminal charges for contempt of court. This is when you directly violate a court order.

While alimony use to affect taxes directly, changes to tax law in 2017, according to the Internal Revenue Service, altered the impact of alimony on taxes. Now, you cannot deduct the financial obligation from your taxes. Similarly, your spouse cannot include the payments as part of his or her yearly income.

Requesting a modification

If your spouse gets a higher paying job, gets remarried or receives a large inheritance, it may seem excessive for him or her to continue to collect alimony payments. Likewise, if you lose your job, suffer an injury or receive a life-altering health diagnosis, you may not realistically maintain your financial obligation.

Modifications to an original alimony agreement may improve its function for both parties. If you petition to modify your alimony agreement, consider including detailed information that supports your case for why the original agreement no longer meets the needs of both parties.