Most people know what alimony is, but it is likely that most people have not considered the tax implications of receiving or paying alimony. For anyone going through a divorce, understanding whether alimony is taxable or not is essential to correctly filing your taxes.
Is alimony taxable in Georgia?
As far as taxes go, the U.S. tax code allows paying spouses to use alimony as a deduction on their taxes. At the same time, receiving spouses must include it when tallying their income for tax purposes.
When does the IRS consider a payment alimony?
As we stated above, you do need to report alimony payments as income, but those payments must meet strict guidelines for the IRS to consider them alimony payments:
- A divorce or separation agreement requires and dictates the payments
- The paying spouse and receiving spouse are not filing a joint return
- Payments are cash, check, or money order
- The order does not specify that the payments are “not alimony”
- The payer and recipient do not reside in the same household
- The payments are not child support
- The payments cease before or at the time of the recipient’s death
What do I need to know as the recipient of alimony payments?
If you currently receive alimony, federal tax codes require you to count these payments as a part of your income on your annual tax forms. Because of this, you must file a Form 1040. The Form 1040A and Form 1040EZ do not have the appropriate sections to record this information.
Record the total amount of alimony received during the year on line 11 of your Form 1040. Some people also opt to file a Schedule NEC instead. This is Form 1040NR. On this form, the amount of alimony received belongs on line 12.
What if I make alimony payments?
If you pay out alimony to your former spouse, you can deduct the total amount paid. This is true whether you itemize your deductions or opt for the standard deduction. It is important to note, however, that you also must file a Form 1040. The popular Form 1040EZ as well as the 1040A lack the space to record this type of payout.
In order to deduct this expense, you will need the total amount of alimony paid during the year, as well as your former spouse’s social security number or other taxpayer identification number. You will record the amount paid on line 31a of the Form 1040; record your former spouse’s information on line 31b.
How can David Ward help me?
It is important to note that we are not tax professionals and cannot offer tax advice based on your individual situation. We recommend taking your specific questions to a licensed Gwinnett County tax professional. However, we can help with any questions you have about divorce, alimony, or payment modifications.
Contact the Ward Law Firm at 770-383-1973 today to learn more about modifying or enforcing your current agreement.