Tax problems during and following a divorce are common, but you can minimize them with a little planning and knowledge about tax law. Few tax issues are as complicated and intricate as alimony payments paid from one spouse to the other, especially since federal legislation is continually rewriting tax law. Before you make an assumption about reporting your alimony payments on your taxes in New Jersey, please read on, then contact an experienced Bergen County, New Jersey alimony lawyer today.
Do you have to count alimony as income on your taxes in New Jersey?
Alimony is taxable income in the state of New Jersey, so anyone who receives alimony payments must still claim the alimony as income and pay state taxes on it. If you make the mistake of not paying income taxes on the alimony you receive, you may get in trouble with the state of New Jersey. While those who receive alimony still have to pay a little in state taxes, they will save big on federal taxes thanks to the Tax Cuts and Jobs Act of 2017.
Must you report alimony on your federal taxes?
The Tax Cuts and Jobs Act changed how the federal government treated alimony. Previously, the federal government viewed alimony as income, requiring you to pay federal taxes on any payments you received. Since the enactment of the act, the person receiving the alimony has a tax advantage instead of the payer. The federal government no longer requires you to report the alimony you receive on your taxes because it does not count as income that you have to pay taxes for. Instead, you will receive the full sum of your alimony as non-taxable money.
Are there any exceptions to the Tax Cuts and Jobs Act of 2017?
It is important to note that the Tax Cuts and Jobs Act of 2017 only changed alimony rules for people who finalized their separation or divorce agreement on or after January 1, 2019. If your skilled Hackensack, New Jersey divorce lawyer helped you to finalize your divorce or separation before this cutoff date, the old rules about getting deductible alimony and having to claim alimony as income on federal taxes still apply to you. The only reason the new tax laws would affect a couple that got divorced in 2018 or earlier is if they modified their agreement and changed the terms of the payments to specify that the new tax laws would apply.
If you have any further questions, please do not hesitate to reach out to our highly qualified family law firm as soon as possible.
Contact Our Experienced Bergen County Firm
If you are facing any family law matter, contact HD Family Law today to schedule your initial consultation.