Alimony payments to an ex have tax repercussions to both the receiving and paying participant. Generally, for the past seven decades the regulations of alimony taxes have remained unchanged. Some of these age-old rules include:
- The spouse that is paying the alimony can deduct these expenses, and the recipient of this money has to consider it as income. For these rules to apply, the ex-couple must either be legally divorced considered legally separated.
- The paying spouse must declare the amount paid on line 31a of their 1040 form. This is an above-the-line deduction, and is deductible even without having to itemize. For receiving spouse, the alimony amount is regarded as income, and must be included on their own Form 1040, and they must pay taxes on it.
- To deduct alimony payments, one needs to have a legal document decree that indicates the payments to be made. These documents can be in the form of a court order, a separation agreement, or declaration of legal divorce. These proof documents must include the precise amount of monies to be paid in alimony. These payments are deductible even in a temporary arrangement. However, in instances where the paying party is still obliged to keep paying after the death of the receiving individual, these funds are not deductible because they are not considered alimony. .
- The payer and payee must not reside in the same residence in order for tax rules to apply. However, in some special cases where separated or divorced couples are court-ordered to share a home, the paying spouse can deduct the alimony. However, the guidelines in such cases are more complex, so one may need to seek help from a tax expert.
- In the year when the deduction is being claimed, the paying spouse cannot file a joint return with receiving spouse.
- Child support is not considered a part of alimony payments and consequently cannot be deducted as such. Child support is also not considered as income by the receiving spouse and therefore, it has no tax consequences. However, in the case of late payment of child support, the IRS applies any alimony paid to the remaining child support balance, so such payments will not be deductible in terms of alimony payments.