Alimony; It’s Tax Deductible
The one thing people usually hate paying more than taxes is alimony, but did you know these payments are often times tax deductible?
What is Alimony?
According to the IRS, Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument. It generally includes four types: Temporary, Rehabilitative, Permanent or Reimbursement Alimony. This is not the same as Child Support.
Alimony Must be Included as Income
Alimony is deductible by the tax payer, and the recipient must include it as income. The recipient can also use the information to determine whether an amount received is considered alimony. That does mean it is taxable income the recipient must claim on his or her taxes.
You Must be Legally Separated
To qualify to deduct spousal support payments, you and your ex spouse must be legally separated and live in separate homes. The payment must not be considered as child support or as part of a property settlement.
This legal nugget is often undervalued in marital separations/ divorces and can be a valuable point when mediating settlement negotiations. It is also an important reminder this time of year for anyone who pays or receives alimony. You might even want to consider amending your prior year(s)’ tax returns if you overlooked this tidbit of information while racing away from the Family Court.
Click below to learn more about Alimony and other possible tax deductions here:
As a Certified Family Court mediator, Ms. Adkins helps many Family Court litigants navigate their minefield of disputes, so they may avoid the often unnecessary emotion and financial cost of trial. Contact Dana Adkins, Attorney at Law, LLC with any questions that may pertain to your unique case.