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What you need to know about alimony and taxes

Many people in Harrisburg cannot wait for the ink to dry on their divorce papers. They may feel so frustrated with their situation that they rush and agree to things before thinking about how the consequences may affect their tax situations once they are single.

It is not uncommon to feel anxious and ready for your separation to be made legal so you can close the door on this chapter of your life. But if you rush through your divorce and make hasty decisions regarding property division, alimony and child support, you could end up with a hefty tax bill or other complications that could adversely impact your financial situation. Before you agree to anything and sign off on your divorce decree, take some time to learn how to avoid tax issues when determining who is to receive and pay alimony.

May qualify as taxable or deductible income

Alimony is taxable income that you should report on your taxes if you are the person receiving it. The person paying it may claim it as a deduction to lower overall tax liability. If you are paying it, the IRS has stipulations in place that can help you to determine if you can deduct it on your taxes.

Requirements that determine deduction status

If you are the payer, your divorce decree must indicate that you are to pay alimony to your former spouse. You do not have to make the payments to your ex directly; you can send them through a designated third party. The payments should not state they are for anything other than spousal support or alimony. If they say child support, they no longer qualify as alimony payments.

The IRS routinely scrutinizes the tax returns of divorced people for inconsistencies. If you or your former partner mistakenly claims alimony payments as taxable or deductions when they are not, you both could end up facing tax penalties. To avoid complications when you file your post-divorce taxes, you should speak to an attorney about your situation to learn more about your options.

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Cunningham, Chernicoff & Warshawsky, P.C.
2320 North 2nd Street
Harrisburg, PA 17110

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Phone: 717-260-3527
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