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The tax status of alimony payments

When a Georgia couple gets divorced, it is possible that one party will pay alimony to the other. One benefit to paying alimony is that it may be treated as a tax-deductible payment. This is only true, however, if a series of requirements are met such as the payment being made in cash or a cash equivalent.

It must also be part of a divorce decree or similar agreement. Furthermore, that agreement or decree cannot imply or state specifically that the payments are not alimony. The payments must be made on behalf of an ex whether they are made directly to that person or to a third-party. Payments are not considered to be alimony if the person who receives the payment lives in the same household or files a joint return with the person who makes the payment.

Payments that don't meet these requirements will be treated as child support or as part of a property division settlement. Even if a payment isn't explicitly determined to be child support, it could be labeled as a payment deemed to be child support. This means that the payment is not deductible on a federal income tax return and is not considered to be taxable income to the recipient.

Alimony is generally designed to help a lower earning spouse maintain his or her standard of living after a divorce. It is different from child support as that is intended solely for the benefit of the child and is not deductible. Those who have questions about their tax obligations when they receive payments in connection with a divorce order should meet with legal counsel.

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Hecht Family Law
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