Stephen J. Buhler, Attorney at Law

How are alimony payments treated by the IRS?

Many Salt Lake City residents may think of divorce as being the end of many things, most notably the relationship between two spouses. Whether the divorce proceeding moves quickly or lasts for quite some time, individuals often believe the final decree will resolve everything and put an end to all divorce-related matters.

This is not always the case, however, as family law disputes can linger on well after the initial divorce decree is signed off on, which can bring the parties back into court to resolve their differences. Even when there are not disputes that arise after the divorce, there may also be additional considerations that must be made based on the divorce.

For instance, there are tax consequences that have to be taken into consideration when spousal support payments, otherwise known as alimony, are made. Under the rules of the Internal Revenue Service, alimony is typically deductible by the former spouse who makes the payments. On the other hand, the recipient of the payments must include them in that person's income.

Notably, the IRS rules may touch on matters more broadly than one might initially imagine. For example, life insurance premiums that are paid under a divorce or separation agreement may be included as alimony. Likewise, if the divorce order says an individual must pay expenses for a home owned by the former spouses, some of those payments may also be considered alimony. Mortgage payments, as well as taxes and insurance, may be considered in conjunction with this rule.

Accordingly, even if the former spouses would not ordinarily think of certain payments as being alimony, those payments could be treated as alimony by the IRS. This treatment means there could be tax consequences for both sides, which should be taken into consideration both during the divorce and at the time the person files their taxes.

Source: IRS, "Alimony," accessed on Sept. 12, 2015

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