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When alimony is awarded in a divorce, both partners will feel the effects during tax season. The person receiving alimony payments must report this as taxable income for the year they began to receive payments. The person who is paying alimony to the other spouse can report these payments as tax deductions.
The alimony recipient
Alimony is taxable income; however, deductions are not automatically made when your ex-spouse signs over that monthly check. To avoid problems when it comes time for filing your tax return, it may be wise to make estimated tax payments or have a bigger chunk of your paycheck withheld in anticipation of taxes on alimony income. If you do not anticipate these added taxes, you may end up owing the government money.
Another thing to note is that once you begin receiving alimony payments, you will no longer be able to use the shorter simpler tax form 1040EZ. To report alimony income you must use to long Form 1040, using line 11 to report alimony for the year.
The alimony provider
If the court has ordered you the responsibility of paying your ex-spouse alimony, the good news is that you now have a new tax deduction. Using Form 1040 (line 31), the individual who pays alimony may subtract alimony payments from their income. Not only will you not be taxed on this money, but in some cases, it may also alter your tax bracket favorably. When entering how much alimony was paid, you must also provide the social security number of your ex-spouse to help the IRS ensure s/he is reporting that money as income.
There are penalties for both failing to provide a spouse with tax ID information and failing to include this information on the tax forms. Additionally, if the tax ID information is missing, the IRS may not allow the deduction on the alimony provider’s tax return.
Child support is NOT the same
Unlike alimony, child support is NOT considered taxable income and can not be deducted pay the individual paying child support. This means that the parent who received child support payments does not have to report this money as income. The parent who pays child support and not “write-off” these payments as a deduction on their tax returns.
To learn more about taxes following a divorce, you may wish to contact the IRS, which publishes information about taxes and divorce in a publication called Divorced or Separated Individuals. You may also want to speak with a qualified attorney who can ensure that your best interests are protected during your divorce.