Spousal Support and Tax Implications

schaumburg tax attorney spousal supportIn Illinois, spousal maintenance payments or alimony can be deducted by the party that is responsible for paying them for tax purposes. Also, the receiving party can also count it as taxable income. These payments can be made non-taxable or non-deductible in the divorce settlement as well.

What Does Not Come Under Spousal Maintenance For Tax Purposes?

According to the IRS, payments that are considered to be part of spousal support include:

  • Child support
  • Non-cash property settlements
  • Voluntary payments for items
  • Upkeep of the payer’s property if the spouse lives in it rent-free

What Comes Under Spousal Maintenance for Tax Purposes

Spousal maintenance can include payments that are made to a third party on your spouse’s behalf. It can be a part of the divorce settlement you come up with together. The settlement can include medical bills that pertain to your spouse, housing cost and taxes.

If you are receiving support payments from your spouse, you should be aware of how it can impact your taxes. When your ex spouse writes you a paycheck, you need to pay taxes on it yourself. He/she is not obligated to do that for you. It’s like what a self-employed individual will do. You can also choose to withhold the extra amount. However, paying taxes on time is better than waiting for that large tax bill come April 15.

Paying Spousal Support

If you are responsible for paying spousal support, you can actually deduct those payments from your taxable income. Be advised this is only applicable for spousal, not child support or division of property. The IRS is quite particular about these, especially during the first year of a divorce. The IRS will go through the payments with a fine-tooth comb to ensure other payments are not includes as deductibles.

Another thing you should consider when you are making support payment negotiations is they should not be tied into anything pertaining to your children. Child support is NOT tax deductible.

A divorce can make you question your future and particularly how taxes will be calculated on different settlement issues. Our reliable divorce attorneys at the Law Office of Fedor Kozlov are proficient in Illinois tax laws and this includes tax consequences on property division as well as your rights for dependency exemption. Get in touch with us at Schaumburg, IL today by calling 847-241-1299.

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