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Family law: What is the effect of alimony on tax returns?

Divorced individuals in New Jersey may have questions about the spousal support (also known as alimony) they are ordered to pay. Confusion often arises between child support and alimony when it comes to taxes. Family law determines whether a payment qualifies as spousal support, and income tax laws determine whether it is deductible.

Any payment to a former spouse or partner that qualifies as alimony may be deducted when tax returns are submitted because the person receiving those finds will have to report it as income and pay taxes on it. This applies to spousal support or separate maintenance payments, regardless of whether the money is paid to an ex-spouse or a third party for that spouse. Conversely, child support is not regarded as income for the parent receiving it, and because no tax is paid on it, the parent paying that support cannot deduct it.

For payments to qualify as spousal support, the parties cannot file a joint tax return, and the payments must be made in cash -- which could also be money orders, checks or bank transfers. The amount must be indicated as alimony on the divorce decree or separation agreement, and the two parties must live separately. It will not qualify as spousal support if they share one household. Furthermore, there must be no liability for the paying spouse to continue payments after the other party's death.

Spousal support issues could become complicated, and any questions can be answered by an experienced New Jersey family law attorney. A lawyer can explain the effects of alimony on tax returns, whether it is the person paying spousal support or the one receiving it. He or she can also explain the proper way for reporting alimony on federal tax returns.

Source: FindLaw, "Alimony and Taxes", Accessed on Nov. 2, 2017

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