No one is excited about being ordered to pay alimony after a divorce, but at least alimony is tax deductible to the person paying it. Just be sure you understand how the IRS views your payments to your ex and document, document, document. Here are a few things you should know about tax deductions for alimony.
- Alimony can include a number of things, in addition to cash, checks or money orders. For example, if you made payments on a life insurance policy your ex owns, that can be deducted.
- If you make payments to a third party on your ex-spouse’s behalf (for example, a mortgage payment, tuition or a medical expense), you need documentation. Your spouse must ask for the third-party payment in writing and you must have received this request before you file your tax return.
- If you jointly own a property, you may be able to deduct half of the expenses but you should consult a tax attorney to ensure this deduction applies in your case.
- If you transfer property to your ex in lieu of a financial transfer, you cannot deduct the value of that property.
Remember, child support is NOT tax deductible. It’s best not to entangle alimony payments or property transfers with child support, which could muddy the water and lead to potential IRS problems.