You’re probably aware that alimony you receive is taxable income. However, determining what’s considered alimony may not be as simple as it appears at first glance, because you can receive several types of payments when you divorce or separate from your spouse.
For example, say your agreement includes a noncash settlement such as a house. That’s not alimony, and generally is not taxable to you. Voluntary payments made in addition to, or without benefit of, a written court document are generally not alimony, either.
So what is alimony? Alimony is broadly defined as payments you receive in cash from your former spouse under a divorce decree or separation agreement. The payments can’t be treated as child support or property settlements in the terms of the legal document, and they must stop at death. Other requirements include living in separate households and not filing a joint federal income tax return.
When you’re sure the payments you receive are alimony, you’ll need to report them in the year of receipt, using the standard Form 1040. You’re also required to provide your social security number to your ex-spouse, and you could have to pay a penalty if you refuse.
Please contact us to discuss the effect of alimony on your tax situation. We can help you plan your financial future.