As residents of Kentucky may already know, those who receive alimony payments -- also referred to as spousal support -- must report them as income for tax purposes while those who pay alimony may be able to deduct such payments from their income. With tax season just around the corner, it is important for individuals to understand this, especially if they have recently divorced.
The Internal Revenue Service notes certain instances in which alimony payments will be considered taxable income. First of all, each spouse must file their taxes separately for alimony payments to be considered taxable income. Alimony must be paid either in cash, check or money order to be considered income. Moreover, if a couple is separated or divorced, they may not both reside in the same household when spousal support is being paid.
In addition, the party's divorce decree must not state that the payments being made are not for spousal support purposes. This includes payments that are made for the purposes of a property settlement or child support, which are not considered spousal support.
If a spouse is receiving alimony, he or she is obligated to disclose the full amount of payments either made or received. In addition, it is not necessary for an individual who is paying spousal support to itemize his or her deductions in order to take advantage of the alimony deduction. However, there are certain forms that must be used to claim the deduction.
No one wants to find themselves running afoul of the law, particularly when it comes to taxes. Post-divorce finances can be tricky, so when it comes to reporting income regarding spousal maintenance, it is important that everything is done right the first time around, to avoid problems down the road.