The judge ordered you to pay a chunk of change each month as spousal support (“alimony”). You’re hoping your spouse gets a job or a fat, juicy raise so your monthly outlay goes down. That alimony order can be a shocker – but there is a little silver lining, courtesy of the Internal Revenue Service.
Under Internal Revenue Code section 71, your spousal support payments are generally tax deductible to you, and are to be reported as income to the receiving spouse. Not so for child support payments (sorry…it’s considered the children’s money). Of course, Uncle Sam has rules, rules, rules for the spousal support to qualify as a tax deduction, but they’re not too bad:
- You and your Ex do not file a joint tax return together;
- You’ve made your payments in cash (checks and money orders are o.k.);
- You have a written divorce agreement, judgment, court order or legal separation agreement that doesn’t specifically say that your spousal support payments are “not alimony”;
- If you are legally separated under a divorce judgment or legal separation judgment, but you and your Ex are still members of the same household when you make the spousal support payments (yes, it happens) – then you can’t deduct those payments;
- You must not be obligated to make any payment for the spousal support amounts after the death of your Ex;
- The payments you deduct cannot have been used as child support.
A few more tidbits on the subject: Cash payments you make to a third party on behalf of your Ex, when required by a divorce settlement/order, can be considered “alimony” for tax purposes. Make sure you provide your Ex’s social security number on your tax return, otherwise Uncle Sam may disallow your deductions for the alimony payments. If you are ordered to pay both child and spousal support and you get behind in your payments, your payments will be applied first to the child support amounts due, then to alimony.
For more information, contact a savvy CPA who routinely handles the tax issues of divorcing/divorced people. CPA Mark Thomas, accountant extraordinaire is one of those savvy experts – you’ll find him in Lake Elsinore (951-245-7750) or firstname.lastname@example.org