While definitely not guaranteed, spousal support or alimony payments end up being part of some divorce settlements. Depending on the circumstances as well as the financial situations of the ex-partners, one spouse may be ordered to make monthly payments to the other in order to take care of some basic living expenses. The person obligated to provide spousal support may be able to secure some tax deductions for making the payments.
Alimony law in Texas changes frequently, as does tax law. However, by making some agreements with your ex-spouse and meeting certain tax law requirements, you may be able to receive some tax breaks.
In order to deduct alimony on your taxes, it must first be provable that your payments were made as part of a written divorce document. Secondly, your alimony agreement must indicate that the payments are to cease if the ex-spouse passes away. If you are still obligated to make payments even after your former spouse dies, you cannot deduct any of your alimony.
Thirdly, the payments must have been made to your former spouse, or on his or her behalf. If your divorce agreement states that alimony is to be paid to an attorney, you will still be able to deduct some of your alimony as long as payments are made on your ex’s behalf. Additionally, alimony payments must be made in cash or the equivalent. Tax breaks can also only occur if you and your spouse live apart and file taxes separately.
In order to take deductions, you must be able to prove that your payments were not considered to be child support. A factor to watch out for involves the amount by which monthly alimony is reduced when a child reaches a certain milestone. For example, if your divorce agreement states that you should pay $3,000 each month in alimony, but the payments will only be $2000 once your child turns 18, gets married or leaves the house, you can only consider $2000 of each payment to be tax deductible. This can get complicated. If you’re ever in doubt about how to get your tax breaks, it may be worthwhile to seek the help of an attorney.
Source: marketwatch.com, “There is one tax break for divorcees” Bill Bischoff, Dec. 16, 2013