When you are getting a divorce, the question of alimony might come up. If this is the case with your divorce, you should understand some points about alimony and how it affects your taxes. This can be an important consideration during the negotiations if you are going through mediation.
Who pays taxes on alimony payments?
The person who receives that alimony is the person who is responsible for the taxes on those payments. If you are paying the alimony, you can count the payments as a deduction in most cases. You should make sure that you read the order for the alimony, as there are sometimes exceptions to this general guide about who pays the taxes on alimony payments.
Why does the recipient pay taxes on alimony?
The recipient is the person who is benefiting from the alimony, which is considered income. Generally, this person will be in a lower tax bracket than the person who is paying the alimony so he or she won’t have to pay as much in taxes. This isn’t the case for child support payments, which aren’t ever deductible for the payer because the intended beneficiary of the child support payments is the child.
Are there any requirements for deducting alimony payments?
There are several requirements for deducting alimony payments. You and the recipient can’t file a joint return. You have to pay the alimony in cash, check or money orders. The order must say that the payments are alimony and not any other type of payment, such as child support. Other requirements might be present so you should take the time to learn about how your alimony payments affect your taxes as soon as possible.
Source: FindLaw, “Alimony and Taxes,” accessed Sep. 02, 2016