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Alimony payments have tax implications for both parties

Alimony is one option that is present in some divorces when one party makes more money than the other party. If your divorce is likely to include alimony payments, you should make sure that you understand some basic points about them.

One area that is especially important for you to consider is how alimony will impact your taxes. The answer to this issue depends on whether you are the payer or the payee.

Tax implications for the payer

You can deduct alimony on taxes if you are court ordered to make the payments. Of course, like anything else that has to do with taxes, there are conditions that have to be met. You and your ex must file separate returns, you and your spouse live in different homes, you make the payments in cash, check or money order, your payment isn't for child support, and you don't have to continue the payments after your ex dies are all conditions that must be met.

Tax implications for the payee

You must claim alimony as income on your taxes. This means that you will have to pay taxes on the alimony payments that are made to you. With this in mind, you must ensure that you are ready to do so when it is time to file your income taxes.

Alimony payments are a very serious issue in a divorce. Before you seek alimony or agree to pay it, you should make sure you understand exactly how it will impact you. If alimony is ordered by the court, make sure you understand the order and comply with it to avoid future issues.

Source: FindLaw, "Alimony and Taxes," accessed April 13, 2017

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