Alimony in Amicable Divorce
Frequently Asked Questions About Alimony
- How is Alimony Determined in a Divorce?
- How Are the Tax Consequences of Alimony Shifted in a Divorce?
- Are There Alimony Guidelines in Pennsylvania?
Under Pennsylvania law, “alimony” refers to post-divorce periodic payments to a former spouse. In contrast, spousal support and alimony pendente lite payments are payments prior to the divorce. Under the Pennsylvania Support Guidelines, the amount for spousal support and alimony pendente lite are based, in general, on a formula: payor’s net income minus recipient’s net income, minus payor’s contribution to child support equals a net number and 30% of that is paid as spousal support or alimony pendente lite. Without children, the percentage is 40%. One receives either spousal support or alimony pendente lite; the difference in the labels depends on certain fault factors.^TOP
How Are the Tax Consequences of Alimony Shifted in a Divorce?
Under the Internal Revenue Code, there are a number of requirements in order for a payment from one spouse to the other to be considered alimony for tax purposes. If a payment qualifies as alimony for tax purposes, the recipient includes that money in income and the payor deducts that money, and it is sheltered from federal taxes. In some circumstances, the parties can designate payments which could otherwise be treated as alimony for tax purposes, as payments for which there will be no such tax treatment.^TOP
In general, there is no formula for post-divorce alimony. Often alimony is considered a secondary remedy, i.e. after the equitable distribution has been determined. Alimony may be awarded based on the reasonable needs and the ability to pay after the asset division in the divorce case. Often a differential in income, which is relevant for spousal support or alimony pendente lite becomes irrelevant post-divorce. For example, a dependent spouse who still can support him/herself after the divorce may not be a candidate for alimony, even though the wealthier spouse has income that is two or three times greater. In general, with little clear guidance in the statute or the caselaw, the issue of how much alimony and for how long is subject to negotiation. The tax treatment of alimony payments may allow for a creative settlement whereby the income superior spouse may choose to pay more in alimony because of the favorable tax treatment, and the dependent spouse will calculate alimony net of taxes based on a lower tax bracket. An alimony agreement can be made non-modifiable, which is another feature that is generally not available with court-ordered alimony.^TOP