How to Make Sure Alimony Payments Are Tax Deductible
Not all alimony payments automatically qualify as being tax deductible. There are seven different requirements that the IRS has for taxpayers who want to deduct payments they make for alimony. They are as follows:
- Payments should be in cash or check. You cannot give assets that equal the value of your payment if you want them to be tax deductible. You must make payments with cash or check.
- Designate payments as tax-deductible on your documents. All of your payments should be made according to the terms of your divorce documents. All you need to do is make sure that your documents state the exact amount you need to pay and describe it as spousal support, spousal maintenance or alimony. You should also make sure your documents label these payments as tax deductible by the payer.
- Do not list alimony as child support or part of a settlement. Child support payments are never tax deductible, so listing your alimony payments as part of child support could cost you big-time on deductions. The same goes for marital property division.
- Clarify that your payments end upon the recipient’s death. In most cases, you also have the right to cease payments upon the remarriage of the recipient.
- Live apart from your ex. So long as you are still living with your ex, you cannot earn tax deductions for your alimony payments.
- Don’t file your tax return jointly. This precludes you from deducting alimony payments on your return.
- Don’t pay extra. There are certain rules that the IRS has against front-loading your alimony, particularly within the first three years after separation. Excessive payments are subject to tax or recapture.
For more tax tips and additional guidance on your alimony payments, speak with a respected Queens divorce lawyer at Bryan L. Salamone & Associates.