As tax time approaches, it is a great time to be thinking about any changes to your tax status that could impact your annual return. Changes in marital status, as well as child support payments or spousal maintenance have important tax implications. Spousal maintenance is the money paid from one spouse to another after a separation or divorce in an attempt to help the party that earns less maintain the same standard of living. These payments are considered alimony for tax purposes and must be reported by both the individual who made the payments as well as the individual who received the support.
Can You Deduct Spousal Maintenance On Your Taxes?
In most cases, the IRS allows the spouse who pays spousal maintenance to deduct these payments for the purposes of their tax return. The spouse receiving payment should also report these payments as income on their return. This often benefits both individuals – as it effectively transfers income from the person in the higher tax bracket to the individual in the lower tax bracket. You should note that you can only deduct these payment if you itemize these deductions. In addition, you should follow additional guidelines to be sure that your spousal maintenance payments are tax deductible:
● Payments must be made in case or by check (you cannot deduct “in kind” payments like gifts).
● Make your payments based on the documents from your divorce settlement and designate these payments as tax-deductible. You must also live separately to qualify for these deductions and cannot front load these payments.
● Child support payments, unlike spousal maintenance, are NOT tax deductible, so separate these two payments so that you can deduct spousal support.
● You must file separate returns in order to deduct spousal maintenance payments.
Divorce Mediation: Settlement with Your Financial Future In Mind
Johnson Mediation, of Chanhassen, MN, can help you set up your divorce settlement so that your spousal maintenance payments can easily be deducted on your annual tax return. Our team understands the intricacies of spousal support, child support as well as other aspects of a divorce settlement and can help you navigate the divorce process with your financial future in mind. We can explain these details to you and your divorcing spouse during the divorce settlement process, or we can review your settlement documents and help you determine if deduction is possible. For more information or if you want to work with our divorce mediation team, call 952-401-7599 for assistance.