It’s tax time again, that time of year when virtually every American who has to pay alimony reaps an enviable benefit: an above-the-line tax deduction.
Generally speaking, for tax purposes alimony is deductible from income by the payer and must be declared as income by the recipient. The payer deducts the total amount paid in alimony during the prior year from his gross income on his tax form — above the line where the taxpayer calculates his adjusted gross income.
Every taxpayer can take an above-the-line deduction, whether he itemizes his deductions or not. Taxpayers who do itemize deductions get a bigger bang for their buck on above-the-line deductions than they get for itemized deductions such as home mortgage interest.
Alimony payments must meet certain qualifications to be deductible. A payer must be required by a court order to pay alimony. The order can cover the time while the couple is separated, before they get divorced, or there can be a decree of dissolution of marriage. To be deductible by the payer, the court order must specify that the payments terminate on the death of either party.
The payer and payee can’t live together while payments are being made, and the deductible alimony must be separate from any child support that the payer is paying to the payee. A blended payment that covers both child support and alimony will not be deductible unless the court — and the IRS — can determine which portion of the payment is for the support of the former spouse.
Taxes can get complicated, and some life events such as divorce can further complicate the filing process. Rely on the advice of your divorce attorney and a tax professional to guide you through the process as smoothly and efficiently as possible.
Forbes: “Taxes From A to Z: A Is For Alimony,” Kelly Phillips Erb, Mar. 3, 2012