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Understanding the basics of alimony can help you financially plan

Alimony, which is sometimes called spousal support, is a type of payment made from one former spouse to another after divorce. However, alimony is not a component in all divorces, so if you are going through divorce, it can be helpful to understand the basics of what alimony is and how an alimony award is determined.

What is alimony?

Alimony is a court-ordered payment made from the wealthier ex-spouse to the less wealthy ex-spouse to help balance any economic effects caused by the divorce. In Mississippi, alimony can be either lump sum or periodic payment. Lump sum alimony involves a fixed amount of money that can be paid at one time or over a period of time. However, the total amount cannot be changed. Periodic payment alimony is paid over time, and the payment amounts can be modified or canceled under certain circumstances.

How the court determines an alimony amount

Alimony awards can be difficult to estimate. This is because they can vary greatly based on a divorcing couple’s unique situation. When deciding on the amount for an alimony award, a judge may consider:

  • The health of both ex-spouses
  • The earning capacity of both ex-spouses
  • All sources of income for both ex-spouses
  • Reasonable needs of the lower wage-earner and children
  • Needed living expenses of the higher wage-earner
  • Standard of living in marriage
  • Estimated income taxes for both ex-spouses

Alimony has tax implications

If alimony may be awarded in your divorce, you should keep in mind that alimony is taxed differently now than it had been taxed before 2019. Under the previous law, the person paying alimony would receive a deduction, and the person receiving alimony would pay income taxes for it. However, now the spouse making the alimony payment will pay the taxes for it instead of the person receiving the alimony. If you may be impacted by making or receiving alimony payments, it might be helpful to consider how this new tax law could impact your financial situation.

Alimony awards can be difficult to estimate. However, an understanding of the basic components of alimony can help divorcing spouses prepare for the effects alimony could have on their financial situations.

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