Massachusetts divorce lawyer Josey Lyne Payne examines whether alimony payments are tax deductible in Massachusetts.
Not all alimony payments qualify as tax deductions. The IRS has requirements that must be met in order for taxpayers to seek a deduction for alimony payments. The following is a basic guideline for ensuring your alimony payments are tax deductible:
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- Make payments in cash or by check directly to the recipient spouse
- Abide by your Court order and designate payments as tax-deductible
- Do not characterize payments as child support or as a part of a property settlement
- Make sure to specify that alimony ends at the recipient’s death
- Do not cohabitate
- File separate tax returns
- Do not pay extra alimony up front
- Claiming the Deduction
Your payments must be in the form of cash and/or check; AND must be for the benefit of the recipient spouse. The value of any other item as in-kind alimony – for example giving your spouse a car worth $20,000 instead of $20,000 in cash – is not tax deductible. Likewise, if you and the recipient spouse agree that you will give your child cash to put a down payment on a car instead of alimony, that amount is also not tax deductible because the cash was not for the benefit of the recipient spouse, it was for the benefit of the child.
Make your payments in accordance with your divorce decree. Payments made pursuant to a temporary order also qualify. Ensure that your documents state the amount to be paid and that it is described as “alimony”. Moreover, the decree should clearly state that alimony payments are deductible by the payor spouse and taxable to the recipient spouse.
Unlike alimony, child support payments are never tax deductible. If your alimony payments are conditioned upon or connected to a child related provision or event in any way, it is likely that the IRS may reclassify the alimony, even retroactively, as non-deductible child support. For example, if your decree states that alimony will end when your child becomes emancipated, the IRS may reclassify what you call alimony as support because it is conditioned upon a child related provision or event, and thus creates the inference that the support is not for the benefit of the recipient spouse, but for the benefit of the child. If the IRS reclassifies your alimony as child support, all past alimony payments would also be disallowed and you would owe back taxes. Moreover, if you decide to divvy up your marital property disproportionately in lieu of paying alimony, the value allocated to the property is not tax deductible as alimony.
The divorce decree must provide that alimony payments terminate when the recipient spouse dies. Similarly, the decree may provide that the alimony obligation terminates when the payor spouse dies.
If the payor spouse and the recipient spouse are living together, alimony payments are not tax deductible. Payments must be made after a physical separation to qualify as tax deductions.
If the payor spouse and the recipient spouse file a joint tax return, alimony payments are not deductible.
The IRS calls this front-loading, and there are rules which govern this practice. Front-loading is the advance payment of alimony that would be due at a later date. Alimony should not be excessively high or front-loaded in the first three (3) post-separation years. Excessive payments are subject to a recapture by the IRS or being taxed to the payor in the third post-separation year.
The payor spouse can deduct the amount of alimony payments even if deductions are not itemized on an income tax return. The standard IRS Form 1040 allows taxpayers to claim the deduction, but the Form 1040EZ or Form 1040A do not allow for the deduction.
Think you have an alimony case in Massachusetts? Estimate the amount and duration of alimony in your case with the Lynch & Owens Massachusetts Alimony Calculator:
About the Author: Josey Lyne Payne is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts.
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