The lump sum alimony tax trap
You may get an offer something like this from an opposing lawyer:
We'll give you your spouse's share of the house as lump sum alimony. "Hey, sounds good," you think. You know Florida law. You know that spouses usually split their equity in a house equally if the house was purchased during the marriage. "I get my spouse half of the house," you think, and you continue with other settlement terms. In exchange for half the equity in the house, you give up your interest in, say, your spouse's 401(k). "That's a fair and even swap," you say. "My spouse keeps his or her 401(k), but I get all the house."
But, ouch! Watch out! You just got stung by one little word: "alimony."
As I've explained in the past, the person who is receiving alimony may have to pay taxes on the received alimony as if it were income. The person paying alimony may be able to claim the alimony paid as a tax deduction.
When you accepted half the house as alimony, you may have just taken a big tax hit and given your spouse a big tax deduction. The deal is suddenly not looking so equal, is it? Make sure you take the house as a marital distribution, not as alimony, unless you're really certain you know what you are doing. One little word can cost you thousands.
This divorce stuff sure is tricky, isn't it?
2 Comments:
i married a man outside trhe usa in honduras the marriage was never consummated since i left 7 days after and have not returned since. can i file for annulment myself? where would i find the forma nd law for florida? an attorney told me it was ok but it would cost me 2k doing it with her, i dont have that kind of money so please help, thanks.married june of 2006. florida resident . never file immigration forms. zstar@Hotmail.com
I received "lump sum alimony", in two payments along with division of property and household items.
My ex-husband has now issued me a 1099-misc., for the second payment,actually it was issued by his employer. I let my former spouse know what was happening, he didn't care, I confronted his employer they think this is correct. I spoke to my lawyer, she advised this is incorrect. What do I do now?
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