On behalf of Stange Law Firm, PC posted in family law on Saturday, August 26, 2017.
When divorced Missouri couples pay alimony, it is in most cases tax-deductible. Recipients are requred to report it as income on their federal tax return. If a payment is designated as either child support or a part of a property division agreement, it cannot be considered alimony. The IRS has seven conditions that must be met to separate spousal support payments from child support or other types of payments.
A payment cannot be labeled as child support, and the payments must stop when the recipient dies. It is also important that the payments are made in cash or with a cash equivalent. Any payments that are considered alimony must be pursuant to a formal divorce decree or other formal divorce agreement between the two parties.
To qualify as a tax-deductible alimony payment, the divorce agreement may not say or imply that it is not. For instance, it may not say that the payment is not to count toward the recipient’s taxable income for the year. Even if a payment qualifies as alimony, people should make sure that it is not subject to recapture. This may be the case if payments are frontloaded in the first two calendar years after a divorce. If they are, some of the alimony already paid must be counted as taxable income in the third year.
Those who have questions about paying spousal support may wish to consult with legal counsel. It may also be a good idea to take that step if an individual has any questions about the tax status of an alimony payment.