The standard rule in Pennsylvania regarding the tax treatment of alimony payments in a divorce is that payments made by the payor are tax deductible and that payments received by the payee constitute taxable income. However, there is an important caveat to this rule. The U.S. Tax Code only permits alimony to be deductible if it is specified in a written order or property settlement agreement.
One of the realities for clients that are involved in child support or spousal support is that the parties' income fluctuates during the course of the order. A support is always modifiable and either party can petition the court to have the order modified at any time. So, for example, if you are paying support, and if your income has decreased as a result of a layoff, reduced work hours, etc., a reduction of your Support Order may be justified.
Celebrity divorce settlements are absorbing for many reasons. Beyond the gossip, it can be intriguing to consider, from a legal point of view, what issues may arise during the divorce when substantial income and assets are involved. Even though the divorcing couple may be quite wealthy, however, the division of assets for higher net-worth individuals and couples during divorce follows a similar process to that which anyone seeking a divorce would find. There are some additional issues, of course, such as the valuation of the assets and the determination of what earnings should be shared in the long term. Those extra steps can also add to the cost of the divorce itself.
Most divorces have negative consequences, emotionally and financially. For the majority of people contemplating divorce, these costs are to be expected. What makes divorce even worse for many people is that the courts do not look at the facts of the marriage and the divorce in the same way that the divorcing spouses do. In other words, the reality of the situation does not match what the court seems to see and what the court decides to do.
When state governments begin to make big changes to their laws regarding alimony, it gets noticed in other states. Whether in Pennsylvania or other parts of the country, very few people are entirely satisfied with the way the spousal support system works. That is why reforms like those that recently passed in Massachusetts get so much attention. The new laws were signed by the governor earlier this week.
Many matters in a divorce are complex, and take some time to resolve. In many cases, where the values of assets and incomes are hard to determine, and the parties are not inclined to cooperate, the cases can seem to linger on and on. Such is the situation with L.A. Dodgers owners Frank and Jamie McCourt. The latest episode in their long-running divorce conflict involves spousal maintenance.
Pro football players for the NFL are already locked out of their workplace, and basketball players for the NBA could find themselves in a similar situation within months. If the standoffs with owners continue into the football and basketball seasons, many professional athletes could find themselves without paychecks.