Divorce and Tax Liability

Top 3 Questions and Answers

Divorce and Tax Liability in the State of Georgia

Tax Season is coming to an end for most of us that did not have to file an extension, and many of our current divorce clients had questions about divorce and tax liability in the state of Georgia. Getting divorced comes with a wide range of financial obligations including potential income tax liability. Spouses who are able to resolve their divorces peacefully can often structure terms that can provide tax benefits on both sides as certain arrangements have tax implications while others do not. So what are the most common questions we get from our clients?

Is Alimony Taxable in Georgia?

Divorce and Tax Liability in Ga - The answers are here

Yes, it is. Alimony is treated differently than child support for income tax purposes. With regard to alimony, the general rule is that payments are deductible by the payer and must be reported as taxable income by the recipient. However, in order for a payment to be considered “alimony” for federal income tax purposes, it must be structured appropriately. Do not avoid paying taxes, we suggest that you meet with a tax professional and a qualified Attorney to learn what agreement is best for you when it comes to divorce and tax liability. 

Is Child Support Taxable in Georgia?

Divorce and tax liability in Georgia - Child Support does not have be claimed as income as it is merely to provide for the child/children

The Internal Revenue Service’s (IRS) answer to this question is clear: “No, child support payments are neither deductible by the payer nor taxable to the recipient. When you calculate your gross income to see if you’re required to file a tax return, don’t include child support payments received.” The reason for this is simple: Since child support payments are intended to meet your child’s/children’s needs, they are not considered the income of the recipient spouse. Parents cannot deduct their child’s costs of living while they are married, and child-related expenses do not become tax deductions as a result of the parents getting divorced. 

Will Dividing Our Marital Assets Trigger Tax Liability?

Divorce and Tax Liability in Georgia

Generally speaking, the process of dividing your marital assets during your divorce will not trigger an income tax liability. The transfer of assets between spouses is not a taxable event, and the IRS allows for non-taxable transfers between former spouses for up to one year as “incident to divorce.” 

However, there are certain property-related transactions that can result in taxes being owed to the IRS. For example, if divorcing spouses agree to sell a jointly-owned asset and split the proceeds, the gains from that sale must be apportioned between the spouses and included in their reported income. If you receive an asset in your divorce settlement and decide to sell it after the marriage is over, this could potentially trigger a tax liability. This goes for capital gain and ordinary income. Our Law Firm is located in Marietta Georgia and we offer free consultations and flat fees for all Family Law matters. Learn about what our clients have to say >>

Contact Us for a Confidential Divorce Consultation with our Attorney Julie Essa and her qualified legal team in Marietta Georgia.