Tax Consequences of Alimony Payments

By Eric Smith
The CPA Journal
December 2016 Edition

The last thing on most people’s minds during a messy divorce is the tax treatment of the support payments that will eventually be made. Unfortunately, many matrimonial attorneys also fail to consider or fully detail the parties’ intended tax treatment of these payments. As a result, final settlement agreements between spouses will often provide for different types of support payments (e.g., alimony, child support) from one spouse to the other, but will be silent as to the allocation of such payments and the extent to which such amounts should be tax deductible by the paying spouse. Similarly, prior to a divorce being finalized, it is common for matrimonial judges to issue temporary orders requiring support payments without detailing the proper tax treatment of such payments.

This frequently leaves accountants with the unenviable task of parsing through the settlement agreements or court orders to determine the proper tax treatment. In many circumstances, this results in uncertainty regarding the position taken on the return or a client unexpectedly learning that he is either required to include support received as income or not allowed to deduct support payments made.

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