| Divorce can affect the finances of both parties for | | | | substantial alimony instead of child support. Many times, |
| years after the dissolution of marriage is complete. | | | | the spouse with the large income can afford to pay |
| One spouse may have new obligations of child | | | | enough alimony to compensate the recipient spouse |
| support and/or alimony payments. There are changes | | | | for the extra tax they will have to pay and still save |
| in how both parties to the divorce will file their tax | | | | money. |
| returns. There are tax-related concerns that a | | | | In order for payments to an ex-spouse to constitute |
| divorced couple should consider. | | | | alimony, there are several requirements that you have |
| The most obvious effect on the taxes is how the tax | | | | to satisfy. They are outlined in IRC §71. The |
| return is filed. The status of "Married Filing Jointly" | | | | payments must be in cash, checks, or money orders. |
| usually offers the most tax advantages. You can file | | | | Alimony cannot be made in debt, property, or services. |
| under this status until the divorce is final. If you decide | | | | The payments must be provided for in a divorce or a |
| to file "Married Filed Separately," you should know that | | | | written agreement. You can't claim alimony during any |
| you can not claim Earned Income Tax Credit. So, if | | | | year for which you file a joint tax return. You can't |
| you have children and your income qualifies you for | | | | claim alimony while sharing a residence with your |
| Earned Income Tax Credit, you may consider working | | | | spouse. The payments have to stop when the |
| together to file jointly and share the amount of the | | | | recipient divorce dies. |
| Earned Income Tax Credit. | | | | If both parties to the divorce have similar incomes, it is |
| Alimony is tax deductible to the person who pays it, | | | | probably best to use child support instead of alimony. |
| and included in the taxable income of the person who | | | | The non-custodial spouse making the payments is |
| receives it. Child support, by contrast, is not considered | | | | likely unable to compensate the custodial parent for |
| taxable income to the person who receives it and not | | | | the extra taxable income they must claim on their |
| tax deductible to the person who pays it. When two | | | | taxes. When considering whether to use child support |
| parties to a divorce have dramatically different | | | | or alimony, it is advisable to consult an accountant or |
| incomes, there may be some tax advantages to using | | | | tax professional to determine which would be best for |
| alimony, even if a judge wouldn't ordinarily award it. A | | | | both parties involved. |
| spouse with a significantly larger income could pay a | | | | |