Alimony & Spousal Support
ALIMONY PAYMENTS AFFECT TAXES
When the end of matrimony leads to the start of alimony, each parting partner can feel the tax effects.
If you are the ex-spouse getting alimony payments, the money is taxable to you as income in the years that it is received. This added income calls for a couple of additional tax considerations for the recipient.
And if the former husband or wife paying spousal support, you get a tax break.
A receiver’s tax costs
First because no taxes are withheld from alimony payments, you might need to make estimated tax payments or increase the amount withheld from your paycheck. If you don’t, you could end up owing the Internal Revenue Service when you file for your final return. Secondly, your option to file shorter, simpler tax forms disappeared with that first alimony check you cashed. Alimony payments must be reported on the line 11 of the long Form 1040.
Tax benefits for the payer
What about the ex making the payments? He or she may complain every month when writing the check, but that taxpayer now has a new tax reduction.
Alimony payments are subtracted from the payer’s income on the line 31 of Form 1040. In addition of entering how much alimony was paid, the filer must include his or here ex spouse’s Social Security number. This enables the IRS to cross-check deducted payments against reported alimony income.
A spouse who gets alimony and refuses to give his or her ex a tax ID number could face a $50 tax penalty. And if you as the payer know the number but forgot to write it in on your return, you could face a separate $50 penalty. Worse if the alimony recipient’s tax ID is missing, the IRS could disallow the deduction.
In cases where a divorce decree calls for alimony and child support, and the amount of each is specifically stated, only the alimony is taxable. Child support is not taxable as income, nor can the partner paying it deduct the cost.
The IRS provides more information on tax issues facing divorced couples in Publication 504, Divorced or Separated Individuals.
Reference: Kay Bell, Bankrate.com