Many parties facing divorce often have questions and concerns about alimony, also known as spousal support or spousal maintenance. Will I have to pay? How much will I be responsible for and for how long?
Another popular question: Is it tax deductible?
Typically yes. If you pay alimony, it is tax deductible, as long as the recipient claims it as income. However, there are rules you must follow if you wish to claim the spousal support you pay as a tax deduction.
4 actions to take if you want to deduct your spousal support
1. Always pay spousal support with money, not property
In some instances, individuals wish to provide other types of consideration, such as property or goods, for spousal support in lieu of cash. But, the value of the goods given to an ex-spouse is not tax deductible. If you wish to deduct your alimony on your taxes, it is best to stick with paying via cash or check.
2. Always pay spousal support separately from child support payments
Under the law, child support payments are never tax deductible. Sometimes, individuals pay both spousal and child support together in one lump payment because it’s simply easier. However, if you wish to deduct your spousal support on your taxes, IRS rules stipulate that these payments must be separate from one another.
3. File a separate tax return
In some instances, divorcing parties opt to file a joint tax return if their divorce is still pending when it comes time to file. And that’s ok. However, if you are paying temporary spousal support during this time, you must file your taxes separately from your spouse if you want to deduct your spousal support payments on your taxes for that year.
4. Live under a separate roof
Couples with pending or final divorces sometimes opt to continue living under the same roof for financial or other reasons. However, if you are paying spousal support and wish to deduct your alimony payments on your tax return, you must live under a different roof than your soon-to-be ex-spouse. Under the eyes of the law, alimony paid for one household is considered payment for shared expenses and is not deductible.
Don’t risk an IRS audit. Consult with a family law attorney for individual guidance
These four guidelines are by no means exhaustive. Like all tax rules, there are a multitude of exceptions and limitations regarding tax deductions pertaining to alimony. The IRS is notorious for auditing individuals who have recently divorced to make sure they have followed important tax rules.
Consulting with an experienced family law attorney before taking any action is recommended.