Tax Consequences for Court-Ordered Maintenance
Taxes are usually complicated for most people. The majority of us probably dread April 15 and wish that we can just forget that it existed. But taxes seem to be more confusing when spousal support is added to the equation. We have broken down the tax implications for court-ordered spousal maintenance, or “maintenance” as it is called in Colorado, to help you better understand how alimony and taxes work.
If a couple has legally separated or divorced, a spouse may have to pay alimony to the lower earning spouse, to ensure they can maintain the standard of living they were accustomed to during the marriage. For court mandated alimony, the spouse paying the support can qualify for a tax deduction, while the spouse receiving funds must report it as taxable income.
Couples who have separated outside of the court’s jurisdiction can still pay spousal support, but they cannot claim it as a tax deduction. In this case, alimony will be considered a gift for tax purposes. This means that the individuals report it, but the money will neither be counted as income nor be tax deductible.
For those who do pay alimony, there are certain IRS stipulations that must be adhered in order to claim a tax deduction.
These qualifications will make the paying spouse eligible for a tax deduction:
- Spousal payments must be made in cash or by check. Not in the form of material goods (i.e. Car).
- Former spouses cannot file a joint tax return.
- The alimony payment is accepted by the receiving spouse.
- The ex-spouses cannot live in the same household.
- Do not characterize alimony as a form of child support. (Child support is never tax deductible).
- Specify that spousal support ends at the other spouse’s death.
- File the proper tax forms for tax deductions.
At The Harris Law Firm, we understand how complicated determining alimony and tax information can be. Contact our experienced Colorado family law attorneys today. We can help review your case and inform you of your rights.