Alimony and tax deduction

For Nevada couples who get a divorce, alimony may be one of the many issues they have to address during the process. However, they should be aware of the tax implications of sending and receiving alimony. People who have to pay a spouse alimony should be particularly aware of the situations in which the alimony they pay may not be tax deductible.

Alimony that is paid as directed by the terms of divorce decree, written separation agreement or separate maintenance decree is typically deductible on a federal tax return. However, there are other certain conditions that must be met in order for the payment to be considered alimony.

The payments are alimony if the spouses do not file a joint return with one another and the payments are made in cash, or its equivalent, such as money orders or check. The payments also must be referred to in the separation or divorce instrument as alimony, and there can be no obligation for the payments to continue after the receiving spouse dies. Any payments made as part of a property settlement or for child support are not considered alimony and have to be included in a spouse's taxable income.

Tax reform legislation that is making the rounds through Congress could end the alimony deduction. However, if the law is approved, taxpayers would still be able to claim the deduction for the 2017 tax year.

An attorney who practices divorce law may be able to help clients obtain favorable settlement terms regarding a wide range of legal divorce issues, including alimony. The attorney might engage in litigation to ensure that clients able to receive the alimony to which they are entitled or, in other cases, ensure that clients will have to pay no more than what the receiving spouse should have.

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