Alimony must meet IRS requirements to be taxable and deductible

Although alimony is not ordered in all divorces, some Georgia couples who do include alimony in their divorce agreements may find the tax implications confusing. There are certain IRS requirements that must be met before alimony, sometimes called spousal support, can qualify as taxable and deductible. A divorcing spouse will likely benefit by understanding the requirements before signing an agreement.

Alimony payments must be made as per a separation or divorce agreement, and payments must be clearly be designated as alimony or maintenance by both the receiver of the money and the person paying it. Payments may not be made to a person who is a member of the same household, even if they are legally separated or divorced. The alimony agreement must state that payments will cease upon the death of the spouse who receives the payments.

All four of these requirements must be met for the payer of alimony to be entitled to tax deductions. At the same time, if these requirements are met, and the payments are recorded as tax deductible, the person receiving the alimony must record the money received as a taxable income. A recent tax case in another state followed an IRS audit concerning a woman who had received alimony from her ex. While he recorded the alimony as deductible on his IRS returns, she never reported the payments as income on her returns.

The alimony agreement clearly indicated the monthly amount that would be paid as alimony until the time she remarries or decides to cohabitate. However, it did not mention anything about the payment stopping in the event of the receiver's death. The court ultimately found that only three of the requirements that would qualify alimony received as taxable were met, and it determined that the monthly amounts she received were not taxable. Georgia spouses who are considering divorce may benefit considerably from discussing alimony requirements and IRS rules with an experienced divorce attorney who can assist in ensuring that these issues are properly addressed within the divorce proceedings.

Source: nevadaappeal.com, "John Bullis: What are not taxable alimony payments?", John R. Bullis, Oct. 15, 2015

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