Taking tax deductions for alimony

If alimony has been awarded as part of a Pennsylvania divorce, the person paying the alimony may be able to take a tax deduction on the amount paid. However, there are several conditions that must be in place. The people must not be living in the same household, and the agreement cannot specify that the alimony is not taxable or deductible. The obligation must be one that ends on the death of the person being paid. Most importantly, the alimony has to be part of a formal legal divorce agreement.

This final point was the decision of the U.S. Tax Court after a man tried to deduct a payment that was not part of his alimony agreement. The man and his spouse had agreed that he would pay her half of a bonus he received in the year before their divorce. However, since the payment was never made part of a court order or separation agreement, the ruling was that the man could not deduct it on his taxes.

The person who receives an alimony payment generally has to pay taxes on it. Child support payments are neither deductible nor taxable.

It may be possible for a couple to reach an agreement regarding alimony, property division, child custody and child support without going to court to have a judge decide. A couple may be more satisfied with an agreement they reach instead of a judge’s decision, and there are a number of ways to structure negotiations for conflict resolution. One way is for the estranged couple to have their respective attorneys take the lead.

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