What alimony tax issues apply when paying or receiving alimony? After all, divorce can be difficult enough. Add to it that divorced individuals may have to pay or receive alimony just complicates issue. If this is your situation, here are some tips for how to correctly treat the payments on your tax return. Continue reading
by Alex Franch, Tax Specialist
Divorces can get pretty ugly, and alimony can feel like a bounty after mutiny. After all, money is often on the top of the agenda. Kids are expensive, so let’s lump them in with the topic of money as well.
Qualifying Alimony Payments
- You and your spouse or former spouse do not file a joint return with each other
- You pay in cash (including checks or money orders)
- The payment is received by (or on behalf of) your spouse or former spouse
- If legally separated under a decree of divorce or separate maintenance, you and your
former spouse are not members of the same household when you make the payment.
- You have no liability to make the payment (in cash or property) after the death of
your spouse or former spouse
- Your payment is not treated as child support or a property settlement
Non-Qualifying Alimony Payments
Here are payments that do not qualify:
- Child support
- Non-cash property settlements
- Payments that are your spouse’s part of community property income
- Payments to keep up the payer’s property
- Use of the payer’s property
What About Property Settlements?
Here is the interesting part of all of the alimony information, property settlements do not qualify and it sometimes happens that alimony can drop. When this happens, the IRS can go back and disallow some of the alimony payments because it considers them to be a property settlement. Divorce can indeed be expensive.
If my loving wife ever reads this, she should know that whatever happens, she would have to
pry the dog from my cold dead hands.