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Understanding the tax issues surrounding alimony payments

On Behalf of | Apr 14, 2015 | Divorce

New Jersey couples who are interested in divorce legal issues may wish to know more about alimony. Without this information, spouses may have difficulty understanding how their taxes may be affected by these payments.

When attempting to understand these tax implications, it is vitally important to understand what is and is not alimony. There are a number of payments made from one ex-spouse to another that would not qualify as alimony. For instance, child support is never counted as alimony. When a payee is responsible for both alimony and child support and fails to make the full payment, that money is allocated to the child support first. The rest is then counted as alimony.

Other types of payments are also not counted as alimony. When payments are made as part of the ex-spouse’s income from community property or settlements are made in property, rather than cash, these are not alimony. Neither are any payments made to the ex-spouse voluntarily.

On the other hand, payments made in cash that are mandated by a divorce or separation agreement may be counted as alimony. The agreement itself cannot specify that the payments will not be considered alimony, however, and the former spouses cannot be living together when the payment is made. These alimony payments may be deducted from the payee’s taxable income. The ex-spouse receiving the payment must then claim those payments as income on their own tax return. When alimony is involved, the two former spouses must use the IRS’s 1040 form instead of the 1040EZ or other tax return forms.

Understanding all of the implications of alimony and other divorce issues can be difficult without the guidance of an attorney. The attorney may be helpful in representing the client throughout the divorce process, including any hearings in front of a judge.


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