The relationship between alimony and taxes

In our last post, we talked about alimony and how having this in your divorce means that the people involved need to keep meticulous records of the payments. Without such records, it is possible that the former spouses could run into legal trouble down the line — may it involve their divorce or their taxes.

Keeping with the alimony theme, and given the tax implications of alimony, we are going to talk about these two related areas today. To begin, it is important to note that depending on which spouse you are in the alimony equation, the payments will affect your taxes differently. The paying spouse can deduct his or her payments from their taxes, while the receiving spouse has to include those payments in their income for tax purposes.

In order to deduct these payments from your taxes as the paying spouse, you must meet certain criteria. You can’t file a joint return with your former spouse; you must pay by cash, check or money order; your payment is made while living separately from your spouse (if you and your spouse are legally separated); and you have no liability to make a payment in the event of your former spouse’s death.

Additionally, you can’t deduct child support payments from your taxes. Property settlements also don’t count as alimony, no matter if they are paid in a lump sum or in installments. These payments are considered a separate piece of the divorce agreement.

If you have questions about your tax situation in the wake of a divorce, you should consult with an experienced divorce attorney.

Source: FindLaw, “Alimony and Taxes,” Accessed Dec. 3, 2015