What Are the Tax Rules Regarding Alimony?
Alimony is treated differently than child support and is considered income by the recipient. The recipient therefore has to include all alimony payments as income and pay taxes on it. The payer receives a tax benefit for these payments, in that they are tax deducible. The alimony payments must also be authorized by a divorce or separation instrument, typically a court order. Since the payer does not have to pay income taxes on alimony payments, the payer prefers alimony payments to child support payments. Because of this, in some divorce situations the payer will agree to increased alimony payments in exchange for reduced child support. In certain situations this will provide substantial tax benefits. Because of the potential to abuse this benefit, the IRS has established a series of restrictions for characterizing support payments as alimony. An experienced attorney can help identify potential problems and create the most beneficial payment schedule for both parties.
Related Questions
- My ex-husband wants to increase the amount of alimony and decrease the amount of child support (but still pay the same amount of money each month) for tax reasons. How would this affect my taxes?
- Can my 401(k) account be attached to pay child support or alimony?
- What Are the Tax Rules Regarding Alimony?
