Alimony and Taxes: What to Know if You Pay Spousal Maintenance

 Posted on April 21, 2016 in Alimony / Maintenance

In a previous blog post, we discussed the issues that an individual who receives spousal maintenance from a former partner needs to know about his or her tax responsibilities. But what if you are the one making spousal maintenance payments? If this is the case, you also have certain tax issues to understand and consider.

It is important that you understand a certain set of tax facts if you are currently making spousal maintenance payments to a former spouse. For clarification or answers to questions specific to your circumstances, speak with an experienced divorce attorney or your accountant.

Spousal Maintenance Payments Are Tax Deductible

Generally, you can deduct the spousal maintenance payments you make from your taxable income, saving yourself some money at the end of the year. But in order to do this, the payments need to be classified according to the IRS' rules regarding spousal maintenance payments.

The IRS has seven requirements that an individual's spousal maintenance payments must meet in order to be tax deductible. If you do not meet all seven of these requirements, you may not deduct them from your taxable income. You can claim this deduction on the standard income tax return form, Form 1040.

The seven requirements that you must meet are as follows:

1. The payments must be made by cash or check. Property of value that your former spouse received as part of your equitable property settlement does not count as alimony for federal tax purposes;   
2. You cannot still live with your former spouse;      
3. You cannot file a joint tax return with your former spouse. If you were still married at some point during the previous year, you are allowed to file your taxes jointly with your spouse. However, filing jointly voids your right to claim your spousal maintenance payments as a tax deduction;   
4. You must specify that the payments will end when your former spouse dies;   
5. You must designate the payments as tax deductible on the appropriate documents. This can include your divorce settlement, separation agreement, or marital settlement agreement. You must state that the money is to be used for spousal maintenance purposes and the amount that will be paid;   
6. You cannot make your payments ahead of schedule to avoid making payments later. You must make your payments according to your set schedule; and   
7. You can only deduct spousal maintenance payments. Child support cannot be deducted on your taxes, so be sure that all of your payments are correctly classified so you can receive your deduction.    

Keep these guidelines in mind as you determine your spousal maintenance agreement during the divorce process.

Work with a Kane County Divorce Attorney

For answers to any questions you have about divorce or related topics like spousal maintenance, property division, and child support, speak with one of the experienced Kane County divorce and family attorneys at the Goostree Law Group in St. Charles, Illinois. Contact our firm today to schedule your free legal consultation with a member of our team.

Source:

https://www.irs.gov/taxtopics/tc452.html