With tax season just around the corner, people required to pay alimony or child support, as well as those receiving, may not be aware of the tax consequences of such payments. Providing the Order's language complies with Internal Revenue Code Sections 71 & 215, a payor may be able to deduct the alimony payments on his taxes. The payee would be required to declare the payments as income (and pay taxes on the income).
If you plan on deducting alimony payments made (line 31 on your 1040), IRC 71 requires eight factors must be met:
- Payments must be made in cash;
- Payments must be to a spouse or on behalf of the spouse;
- Payments must be made pursuant to a divorce or separation
- Payments may not be designated as non-qualifying for tax deductions by the payor or non-taxable to the recipient;
- Spouses may not be members of the same household
- The payment must terminate at the recipient spouse's death;
- Spouses may not file a joint return; and,
- Payment can not constitute child support.
If you receive alimony and your ex-spouse is deducting the payments, you'll have to report it on line 11 on your 1040. Unlike alimony, child support can neither be deducted, nor counted as income.
One other thing to consider come tax time - your marital status on December 31 dictates your filing status. If you're divorced on December 31, you'll file as a single person. But if your marital status on December 31 is married, you'll need to file a joint or separate tax return.
Considering divorcing and wondering how alimony could affect your taxes? An attorney with the Law Offices of David P. Sheehan can assist you. Call our offices.
