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Alimony & Taxes

Alimony & Taxes

Posted By Meyers Law Group, P.C. || 20-Mar-2014

Spousal maintenance is meant to help both spouses keep as much of the same lifestyle as possible, even after a divorce, by having the higher-earning party make payments to the party with a lower income. This support that helps out the lower-income party also becomes a benefit to the paying party come tax season, if alimony gets put down correctly. (There are some situations where it will make more sense to not put alimony down as a deduction, so ask a tax expert about this.) Usually speaking, however, if you can deduct alimony payments you make, you might find yourself in a lower tax bracket, while the recipient spouse's taxes are typically unaffected by putting down alimony as taxable income.

It should be noted, however, that not every maintenance payment is tax-deductible. It will take both financial know-how as well as legal awareness to ensure that your maintenance payments are in compliance with the IRS's guidelines so that they can be deducted. You can find the in-depth legal answers you need at the Meyers Law Group, P.C., but for now, here are some helpful tips for tax season if you pay maintenance:

  1. Maintenance has to be given as a cash or check payment. If you give "in-kind alimony", such as giving your vehicle to your ex, then you cannot deduct this.
  2. Know your agreements and court orders, such as any nuptial agreements, separation agreements, divorce settlement terms, and even temporary support orders. The papers should say how much these payments are, and that they are tax-deductible. Keep to the terms of these documents.
  3. Remember that child support and property settlements are not tax-deductible, so make sure that your maintenance is not intermixed with these separate matters. This could mean, for example, making sure that there is no term that says that maintenance will stop once your child turns 18, because the IRS could say this maintenance is really child support, which you cannot deduct. You also do not want maintenance to look like it was simply the giving of financial assets to your spouse during property division. Talk to a divorce lawyer on how to make sure these matters are in order.
  4. The nuptial agreement/divorce settlement must say that maintenance ends when the recipient passes away. This is because of the reasons listed above. It should be noted that in many cases, you can also put in that maintenance will stop when the recipient gets remarried.
  5. Live separately from your spouse/ex. At whatever stage you are in the divorce process, you and the other party must live in separate households if maintenance is going to be deductible.
  6. Don't file taxes jointly. A joint income tax return will disqualify you from getting your maintenance payments deducted.
  7. Don't frontload. You do not want to pay a great deal extra in maintenance during the first three years after the separation. If you do this, the extra could be recaptured or taxed later on.

Trusted Legal Help for Divorce & Post-Divorce Modifications

While taxes are definitely the arena for a financial expert, when it comes to alimony, then you may also need the expertise of a family law attorney. If you are facing a divorce and need to ensure that all terms are fair and feasible, work with the Meyers Law Group, P.C. If your circumstances have changed and maintenances orders are now unreasonable, talk to a divorce lawyer in Long Island about how you may be able to get these orders modified. But you need to act now, because any unpaid payments will count against you and cannot get discharged by a court, not even by a bankruptcy court. Do not hesitate to contact our firm today!