Tax Consequences Of Alimony Payments For Payors And Recipients

Individuals must consider the tax consequences of obligations related to spousal support or maintenance, also known as alimony, in divorce proceedings. Many soon to be ex-spouses often fail to realize that there are tax consequences for these types of payments, which may cause further economic hardship and even emotional stress.

Spousal support typically refers to the money a legally married spouse pays to the other spouse while they are still married. Spousal support may last as long as the marriage continues. Spousal maintenance consists of payments an ex-spouse pays to his or her ex-spouse after the dissolution of the marriage. The amount and duration of spousal maintenance are defined in the divorce decree. Some states refer to spousal maintenance as alimony. It often is used as a generic term to describe both types of support and will be used as such in this blog.

Tax Effects of Divorce or Separation

Individuals in the middle of, or just beyond a divorce rarely consider the tax ramifications of the agreements that they make as a party to the divorce proceedings. It’s only later that they become aware of the tax consequences of their divorce, when they get their tax bill and their accountant informs them of the special circumstances which increased it.

Tax Effects of Divorce or SeparationHere are some tax effects to remember if you are involved in a divorce or separation:

Who Claims The Kids On Their Taxes, And Other Ways Divorce May Affect Your Taxes

Divorcing couples often wonder who claims the children on their taxes, and in what other ways divorce will affect their taxes. Questions may include which filing status to use after the divorce, and how payments for spousal maintenance and child support to an ex-spouse are treated for tax purposes. Also, inquiries about what happens to assets like the family residence are obviously frequently common.

Filing Status