In California, some divorces will include agreements to pay alimony or orders to do so. If there is a large wage disparity between the spouses, and they have been married for a long time, alimony orders are much likelier to be issued. While spouses who are ordered to make payments to their exes may not like having to do so, the payments may be deductible on their tax returns as long as the language used and the manner in which the payments are made comply with IRS guidelines.
The IRS allows a deduction for alimony by the spouses who must pay it if the alimony payments are established correctly. If the alimony agreement or order does not comply with the IRS’ rules, the payments may not be deducted.
Alimony payments must be made according to a divorce order or a valid separation agreement. All of the payments must be made either in cash or in a cash equivalent, and the payments must be paid directly to the receiving spouses or to third parties for them. If a court specifically states in a divorce order that monetary payments are not to be considered as alimony, they will not be deductible. In order to qualify, the order or agreement must also include a provision that the payment obligation will end once the payee spouse passes away. A paying spouse may not deduct alimony if the ex-spouse continues to share the same home or files a joint tax return with the payor. Alimony may not also be designated as child support.
If a total support amount is ordered or agreed, it should be broken down by the portion that is allocated to child support and the portion that is allocated to alimony. Support may be one of many issues that will need to be handled in a high-asset divorce. People might benefit by getting help from a family law attorney.