Alimony and Taxes
In many cases, alimony is a tax deductible payment. This is not always true, but under most circumstances it can be deducted from the payer’s income. Alimony payments are not usually very favorable for the person paying. The recipient is taxed on alimony, so if the person paying it can deduct it, it may even out the tax considerations a bit.
The IRS has laid out guidelines for what makes alimony deductible. The following conditions must be met:
- The payment must be made by cash or check
- The payments must be mandated and agreed to by a divorce document or settlement agreement
- The payments must be designated in the divorce documents as deductible
- There must be a physical separation for the payments to be deductible
- Payments may be terminated on the death of either the recipient or payer, and many agreements also include stipulations that the payments cease upon the recipients’ remarriage
- It is important to understand the distinction between child support and alimony. If alimony stops when a child is no longer a dependent, it could be classified as child support and therefore not deductible
- The payment structure must be such that it is not too heavily front-loaded with high payments in the first 3 years after separation
Contact Us
If you or someone you love is going through a divorce, an experienced legal counsel can be a huge asset. For more information, contact the West Palm Beach divorce attorneys of Eric N. Klein & Associates, P.A. by calling 561-353-2800.
