Tax season is now well underway. Most Americans do not file their taxes until February, March and even April. If you fall into this majority and have not filed your taxes yet, please remember that spousal maintenance results in certain tax consequences. If you pay or receive spousal maintenance, bring this fact to the attention of the professional who does your taxes.
If you have not yet finalized your divorce, the fact that spousal maintenance, also known as spousal support and alimony, has tax consequences is an important reality to keep in mind. While you are negotiating your property division settlement, the tax consequences associated with paying or receiving spousal support will help to inform your final settlement terms.
Individuals who receive spousal support must generally treat those funds as taxable income. Already divorced individuals must therefore report this income on their taxes. Individuals whose divorces are pending should think twice about spousal support settlement terms and factor in the appropriate tax considerations before accepting these terms.
Conversely, individuals who pay spousal support may generally treat these funds as tax-deductible. Divorced individuals will likely get a break in their tax liability for spousal support payments made over the past year. Individuals who have yet to finalize their divorces should consider the tax advantages of paying spousal support before rejecting this form of property division.
Please consult your family law attorney about which kinds of payments to your former spouse or from your former spouse are considered spousal support for tax purposes. Not all payments made or received from a former spouse actually qualify as spousal support.
Source: Findlaw Law & Daily Life, “Spousal Support and Taxes: 3 Reminders,” Aditi Mukherji, Feb. 6, 2014