While it may not be at the forefront of your mind when you are in the middle of divorce negotiations, the tax implications of paying or receiving alimony are an important factor to keep in mind. Unlike child support, alimony can be deducted from your taxes if it meets certain requirements. Alimony must also be reported as income on your taxes as required if you are the one receiving the payments.
In order for alimony to be deductible, you cannot be filing a joint tax return with your ex. This is true even if you are separated, and the alimony payments are a court-ordered part of the separation. You must be filing separate tax returns, and the payments must also be made in cash or the equivalent, which includes money orders and checks.
The court order requiring the payments must also be clear that the payments are alimony payments and not any kind of other financial obligation. For instance, the alimony payments cannot be treated as child support. You cannot be living in the same household at the time the payments are being made if you wish to deduct them from your taxes, and there can be no court-ordered obligation to continue the payments after your ex’s death.
Deducting or claiming alimony payments is an important part of ensuring that your income is properly reported and your tax records accurate. However, it can also be a confusing process if you have not done so before. Talking with an attorney can help you understand your obligations for reporting the income and how to take advantage of any allowed deductions.
Source: FindLaw, “Alimony and Taxes,” accessed Oct. 16, 2015