Illinois Divorce Basics: Alimony and Taxes

 Posted on December 14, 2016 in Family Law

Not all divorces include alimony (also known as spousal support), but some do. Unfortunately, not every divorcee is prepared for the tax implications of such a provision, and they may be ill-advised by unreliable sources. If you are filing for divorce expect to pay or receive alimony, the following can help you better understand your potential tax obligations. It also provides some key information on how to ensure your best interests are preserved during a divorce with a possible alimony award.

Tax Deductions and Paid Alimony

When the courts award alimony, the paying spouse is often allowed to claim these payments on their taxes. There are some stipulations, however. The Internal Revenue states that you must be able to provide a divorce or separation instrument that states the amount you are ordered to pay. This can come in the form of an official divorce decree or separate maintenance, a written separation agreement, or any other form of decree stating that alimony has been awarded. It is also important to note that the document does not have to be considered valid to claim spousal support on your taxes, but it may be considered void if a court has deemed it invalid. Further, you do not have to itemize your deductions to claim a deduction for alimony paid.

Paying Taxes on Received Alimony

Because alimony can be claimed as a taxable deduction, those receiving alimony are usually required to claim it as income. For those with a significant award amount (or even a minimal amount), this taxation could result in a crippling tax obligation. Thankfully, there may be a way to structure the award so that it does not have as serious of an impact on your financial future. An experienced divorce attorney and a financial advisor can advise you on what your options may be. Further, this legal assistance, if obtained prior to the divorce, can help to improve the overall outcome of your divorce.

When Alimony May Be a Factor in Your Divorce

Whether you are seeking alimony or expect to pay alimony, it is critical to ensure that you have an experienced attorney on your side, protecting your interests. At Mevorah & Giglio Law Offices, we take the time to carefully examine your situation and inform you of your options, giving you the knowledge you need to make the decisions most appropriate for your unique situation. Learn more about how our DuPage County divorce lawyers can assist with your case. Call 630-932-9100 and schedule your free consultation with us today.

Sources:

https://www.irs.gov/pub/irs-pdf/p504.pdf

http://www.bankrate.com/finance/taxes/alimony-payments-affect-taxes.aspx