Alimony
Tax
Deductions and Taxation
Alimony is
Both Deductable and Taxable
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Alimony is considered taxable
income for the payee and deductible by the payer.
You can deduct from
income the amount of alimony or separate
maintenance you paid, and you must
include in your income the amount of
alimony or separate maintenance you
received.
Amounts paid under
divorce or separate maintenance decrees
between you and your spouse or former
spouse are considered alimony by Federal
tax rules.
If your decree of divorce or separate
maintenance provides for alimony and
child support, and you pay less than the
total required, the payments apply first
to child support which is not
deductible. Any remaining amount is
considered alimony.
Property settlements, whether in a lump
sum or installments, do not qualify as
alimony.
Voluntary payments not
required by a divorce decree or
separation instrument do not qualify as
alimony.
The spouse or former spouse who is
receiving the alimony must report the
full amount as income on Form 1040.
It's important for both the payer and
recipient to have alimony payments
clearly defined in the divorce
agreement. The payer of alimony will not
have to itemize the deduction since it's
considered an "above the line"
deduction.
Why would you
want to pay alimony?
Alimony or
spousal support offers
tax advantages that can be financially
helpful to both spouses.
If you and your spouse have dramatically
different incomes, there may be some tax
advantages to using alimony for tax
benefits.
Be careful
writing your divorce decree, an
annulment or separation can complicate
your tax return
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