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Understanding how alimony can impact finances after divorce

As Texas couples prepare to end a marriage, they are faced with a multitude of important decisions that must be made in a relatively short period of time, and often under stressful circumstances. Many of those decisions are related to financial matters. The choices made during a divorce have the power to shape the financial future of both spouses. One commonly overlooked topic is how alimony payments will factor into post-divorce budgeting.

Most Texas couples know that the spouse who is tasked with making alimony payments is able to claim those payments as deductions on his or her tax return. The recipient of alimony payments must claim those funds as income. This will impact each individual differently and is just one of many factors that can influence an individual's tax obligations.

What many people fail to realize, however, is that alimony can be used to put toward retirement savings. Individuals are allowed to contribute as much as $5,500 each year. Those over the age of 50 can contribute $6,500 per year.

In some cases, Texas residents will rely on alimony as an essential source of income. Those funds will be used to cover basic living expenses, with little left over to put into savings. For those who are able to set aside a portion of their monthly income for retirement purposes, using alimony funds in this manner can have a positive impact during tax season. One way to gain a more expansive understanding of these and other divorce issues is to work with a financial advisor before negotiations are underway. 

Source:, "Financial planning for divorce? It's not just for women", Beth Lynch, Oct. 2, 2017

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Vernier & Associates, PLLC Vernier & Associates, PLLC

Vernier & Associates, PLLC
2441 High Timbers Drive Suite 110
The Woodlands, TX 77380

Phone: 281-882-3271
Fax: 832-585-0955

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