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Alimony-related federal taxation rules for Pensacola residents

by | Sep 14, 2020 | Firm News |

When a Florida couple decides to part ways, they have to deal with various divorce-related legal issues. These issues include property division, child custody, child support and alimony. Most of these issues affect a divorcing spouse’s finances as well as the taxes that they have to pay. For instance, per the guidelines of the Internal Revenue Services, child support is never tax deductible; however, alimony payments have an effect on the person’s federal tax.

What does the law say?

According to those guidelines, the spouse who makes the payment of alimony is entitled to deduct that amount from their income. Interestingly, if a spouse pays for both child support and alimony but the total amount is less than what the court ordered, the fund are first utilized for clearing child support dues and the remaining is paid toward alimony.

Alimony is considered for federal taxation

Alimony is considered for federal taxation if the amount was paid in cash and the spouses do not file a combined income tax return. Moreover, the payer and the receiver must not be residing in the same household. At the same time, the spousal support order must clearly state that the amount being paid is toward alimony and not toward property settlement or child support. Another important point to remember is that any payments made by one spouse to another apart from those mentioned in the court’s order are not considered alimony per federal taxation rules.

Deduction of alimony payments

In order to deduct alimony payments, a person does not need to itemize the deductions. Instead, they can claim the deduction through Form 1040. At the time of filling Form 1040, it is necessary to have the Social Security number of the alimony recipient. In the absence of the Social Security number, the IRS may impose a penalty and disallow the deduction. Like the payer, it is necessary for the alimony recipient to report the amounts mentioned in Form 1040 while filing a tax return along with the Social Security number of the alimony payer. Non-compliance to this rule can lead to a penalty.


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