Receiving an alimony award in an Illinois divorce may make a person feel relieved that he or she will be taken care of. However, there are things to know about that payment before depositing it in the bank.
Huffington Post notes that alimony is considered income by the IRS. That means the recipient has to pay taxes on it. Unlike employment earnings, none of that is withheld automatically, so it is a good idea to set some back from each check so that tax time will not become a burden.
Going from two incomes to one can be a shock, and even alimony probably will not bring back the former standard of living. At this point, as GoBankingRates.com explains, it is essential to create a budget that includes all income so that nothing is wasted. Not only should monthly expenses be covered, a person should plan to put some money back for emergencies and retirement.
Not all alimony awards have the same terms. In some cases, the judge intends for the lower income spouse to use the alimony to improve earning potential so that the checks become unnecessary. Because the number of checks may be limited to the amount of time the court expects it to take to become fully self-supporting, it is essential to use every penny to reach that goal.
Someone who is self-supporting but is still facing a lower standard of living may want to use a lump-sum alimony payment as a down payment on a mortgage so that housing expenses can be kept low. Using alimony to get out of debt may be another way to free up more money in a person’s budget.