Category Archives:Alimony


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Divorce Help: Don't Let Your Divorce Be More "Taxing" Than Necessary

Tax
Tax (Photo credit: 401K)

With the federal income tax filing deadline a little under a month away, many California residents are feeling the pressure of preparing and filing their taxes on time.  Filing your taxes can be confusing regardless of your financial situation.  However, they become even more complicated when you have undergone a major life change in the last year, such as a divorce, legal separation or other family law issue.

A divorce is stressful enough and despite your circumstances, the government will still expect you to file your taxes promptly and correctly. If you are really confused about your taxes, the best thing to do is to seek assistance from a tax professional.  Nevertheless, there are a few standard guidelines for filing taxes after a divorce.

What is my tax filing status?
Most importantly, you must decide the correct filing status to use.  In general, your federal income tax filing status is determined by your marital status as of the last day of the tax year.  Thus, if you were married on December 31, 2011, you will be considered married for the entire year.  If you were divorced on December 31, you are considered divorced for the year.  In general, a person who is legally separated is not considered as married.  This can vary based on state law, however, so may be a good idea to double-check with a California family law attorney.  Even if you were still married on December 31, you can choose whether to file jointly or separately.

Can I Qualify as a “Head of Household”
If your divorce was final on or before December 31, 2011, you can either file as single or as head of household.  Filing as “head of household” may result in a lower tax bill than if you were to file as single, but this designation has strict requirements. To qualify as head of household you must:

  • maintain the primary home of household for a qualifying child, or someone you claim as a dependent for more than half the year
  • be unmarried at the end of the year or living apart from your spouse for more than six months
  • provide more than half the cost of maintaining the household
  • be a U.S. citizen or resident alien for the entire tax year

Note: It may not be clear who had custody for more than half the year and is able to file as a head of household when parents have joint physical custody of their child.  The parents should agree between themselves how to handle this issue. A daily log of exactly where the child lives during the year should be kept, as well as a record of household expenses and who paid them.

Can I claim an exemption for my children?
In general, a child’s custodial parent will claim the child as an exemption in their taxes.  Although, in some cases, it may make sense financially to trade the exemption to the other parent.  A financial planner may be able to help you determine the best use of the exemption. 

Are child support payments considered taxable income?
In almost every situation, child support is tax neutral.  Child support payments are not taxable income for the parent receiving the support, nor is it tax deductible for the parent paying the support.

Are alimony payments considered taxable income?

Spousal support, on the other hand, is considered income for tax purposes.  Such payments are almost always taxable income for the recipient –and they are tax deductible for the payor.  There are some guidelines and qualifications in regards to spousal support.  Alimony must be included in an official court order or court-approved settlement in order to qualify for tax deduction.  In addition, any alimony payments made while the spouses lived together may not be deducted.

Are assets transferred as part of my divorce settlement agreement taxable?
In general, when assets are transferred as part of a divorce settlement agreement, the person that receives the transfer does not need to pay taxes based on the transfer alone.  However, if the recipient decided to sell the asset at some future date, they would likely have to pay capital gains on the appreciation of the asset both before and after the transfer.

It cannot be denied that there are many details to consider when preparing your federal income tax return.  If your situation is especially complicated, it may be a good idea to enlist the services of a California tax or family law professional to guide you through the process.

Sources and Related articles

Legal updates brought to you by the Riverside and OC attorneys at Don Ho, LLP.
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Divorce Help: Am I Entitled to Spousal Support?

When dissolving a marriage or domestic partnership, the issue of spousal support or alimony is often a primary concern of the parties.  In general, there are two types of alimony that can be awarded: permanent support, which deals with the support to be received at the conclusion of the divorce going forward, and temporary support, designed to maintain the status quo (as much as possible) during the divorce

Temporary Spousal Support
A spouse may have the right to receive temporary support during the dissolution process for the purpose of assisting that spouse with their financial obligations.  Immediately obtaining a temporary spousal support order may be necessary to secure financial security for a spouse who was dependent on the income of the other party.  Calculations of temporary spousal support are generally based upon the needs of the supported party and the ability of the supporting party to pay.  Prior to a judgment for dissolution, calculations for temporary spousal support are similar to calculations for child support and use a judicially recognized “guideline” calculated by a program.

Permanent Spousal Support
Permanent spousal support, or support ordered after a judgment for dissolution has been entered, is calculated by a careful consideration of a long list of factors under Family Code section 4320.  Such factors include the respective incomes of each spouse, the length of the marriage, ability of a party to pay, the standard of living during the marriage, the assets and debts of each party and whether there has been any domestic violence.  Permanent spousal support is generally payable for duration of half the length of the marriage, except in cases of a marriage of a long duration, or over 10 years, where the court may reserve jurisdiction over the termination of spousal support.  When calculating permanent spousal support it is important to evaluate the specific factors of the Family Code and also to consider the unique facts applicable to the individual’s case.  For example, the supported spouse may require retraining or education, one of the parties may have paid for one spouse to go to school and obtain additional professional skills, the supported spouse may previously had job skills and is that supported spousal maximizing their earning potential.

Modifications for Support Order
Unlike property division orders, an order for spousal support may be modified upon a determination of necessity.  On motion for modification of spousal support, a judge will consider changes in circumstances, such as unemployment or disability.

When you are going through a dissolution that involves temporary spousal support and permanent spousal support in particular it is important to have an experienced family law attorney because a negative result may not be modifiable and may a long-term financial impact.

Legal updates brought to you by the experienced attorneys of the Orange and RiversideCounty Family Law firm of Don Ho, LLP.

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Keep the Prenup Handy: Kim Kardashian Goes From Altar to Divorce Court in Only Seventy-Two Days

On Monday, it was reported that reality TV star Kim Kardashian filed for divorce in a California court from her NBA-playing husband Kris Humphries of only seventy-two days.

Kim Kardashian at the Seventh Annual Hollywood...Image via Wikipedia

It was estimated that over 4 million fans watched the couple marry in a ceremony that is estimated to have cost approximately $10 million.  Kardashian issued a statement explaining that she reached the decision to end the marriage after careful thought and consideration.  Humphries also spoke to reporters, saying that he was devastated to learn of the development and planned to try and save the marriage.

It is unlikely that divorce will make a significant impact on Kardashian’s assets, as the couple signed a prenuptial agreement before they wed.  Prenuptial agreements in California are governed by California’s Uniform Premarital Agreement Act.  They are especially common in states like California that follow the community property system of asset division.  Without a prenup, almost all assets acquired by either party during a marriage are considered to be community property that is divided evenly upon divorce.
Additionally, since it is likely that both parties appear to be fully able to support themselves, there will be no need for spousal support. When it comes to spousal support, also known as alimony, the amount of the award is usually determined by the judge using state guidelines that factor in the incomes of each party. Generally, one spouse’s need is measured against the other spouse’s ability to pay.  When considering spousal support, also known as alimony, judges look at factors such as the length of the marriage, the presence of minor children, the earning capacity of both parties and the age of health of both parties.
Legal updates brought to you by Orange County attorney Don Ho, LLP.
All factual information provided by USA Today
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