Wondering whether you have to pay taxes on alimony payments is not uncommon. Alimony, also known as spousal support, is paid from one spouse to another after a divorce.
In Texas, alimony can be requested if:
- the marriage lasted longer than 10 years;
- the spouse requesting support is disabled or caring for a disabled child and therefore unable to earn reasonable wages; or
- the other spouse was convicted of domestic violence within two years of the date the divorce was filed.
Many issues in divorce affect taxes, and a Plano divorce lawyer can help his or her clients understand them during the divorce process. If alimony is paid or received, it must be reported correctly on tax returns of both the spouse paying the support and receiving it.
What the Payer Needs to Know
Alimony payments must be reported on the payer’s tax returns. They are subtracted from his or her income as a deduction on line 31 of Form 1040. The payer must also include the recipient’s Social Security number on the tax form.
This helps the Internal Revenue Service (IRS) check the ex-spouse’s tax return to ensure that he or she is reporting the received alimony as income. Those receiving payments have to pay taxes on alimony payments.
Including this Social Security number is important. Either or both parties could face a $50 penalty for failing to include the number on the tax return. In some cases, the IRS may not even allow the deduction.
Alimony Deduction Requirements
Alimony is generally tax deductible, as long as the following conditions apply:
- The ex-spouses do not file a joint tax return.
- The ex-spouses are not living together.
- The payments are made in the form of cash, money order or check.
- The alimony is not permanent. If one spouse has no job and has a permanent disability, then alimony may be granted permanently. In this case, the alimony may not be tax deductible.
- The divorce decree does not say that the payments are not considered alimony. For example, the paying spouse cannot claim child support payments as alimony in order to receive a tax deduction.
A Plano divorce lawyer can offer legal representation when negotiating a divorce agreement and figuring out alimony payments. A lawyer may also explain the tax implications of spousal support, such as paying taxes on alimony.