Given the fact that the end of the year is around the corner, divorcing spouses are curious to know, “How does alimony affect my taxes?” Here in New York, we refer (alimony) payments to one’s spouse as spousal support and spousal maintenance respectively. During a separation, the payments are called “spousal maintenance.” Any such payments made after the divorce are called spousal maintenance (support).
According to the Internal Revenue Service, “Amounts paid to a spouse or a former spouse under a divorce decree or separation instrument (including a divorce degree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes.” The IRS goes on to explain that “alimony is deductible by the payer spouse, and the recipient spouse must include it in income.”
What Qualifies as Alimony?
Not ALL payments made to one’s spouse or former spouse qualify as alimony for tax purposes. For example, if you’re the higher-earning spouse and you are not ordered to pay spousal maintenance, but you give your former spouse money each month to “help them get on their feet,” you cannot deduct the payments on your taxes. Your alimony payments must be included in your divorce decree to be tax deductible.
It’s only considered alimony if the following are true:
- You do not file a joint return with your spouse or former spouse.
- The payment was made by using cash, a check or money order.
- The payment was made to a spouse or former spouse under a separation instrument or divorce degree.
- The separation instrument or divorce decree does not state that the payment is not alimony.
- You did not live with your spouse when the payments were made.
- You are not liable to make the payment after your spouse passes away.
- The alimony is not treated as child support or some type of property settlement.
To learn more about alimony and taxes and what is not considered alimony; for example, voluntary payments, contact Casella & Casella LLP to meet with a Staten Island divorce attorney. We would be glad to answer all of your tax-related questions.