Friday, January 5, 2018
Divorce can be an emotionally trying and financially challenging experience. This is true no matter how long or short of a time you and your spouse have been in a marriage.
One area in particular that can spark conflict and confusion is alimony. However, an applied understanding of alimony may help with navigating this matter during a divorce proceeding in New Jersey.
What is alimony?
Alimony, also known as spousal support, refers to the payments that a spouse makes to the other party after they have gotten divorced. It is not a requirement in every divorce; a judge will determine if it is appropriate based on the circumstances surrounding a marital split-up.
Divorcing couples are increasingly deciding on their own how they want to handle alimony, thus avoiding further court intrusion. However, divorce courts are still issuing spousal support judgments after lengthy marriages where one of the spouses earned much more compared with the other party. The court may issue one of these judgments when one of the spouses gave up a career to stay home and care for the children.
What you need to know about alimony for tax purposes
For those making alimony payments, spousal support is tax deductible in the majority of situations. Meanwhile, for alimony payment recipients, it is taxable income.
For this reason, keeping all of your records for paying or receiving alimony is critical. After all, following a divorce, it is not uncommon for a spouse to challenge the amount of alimony he or she is paying or receiving. In addition, the IRS may even look into a spousal support payment situation if needed.
What items to keep
Here are several items you would be wise to keep if you are the alimony recipient:
- Document listing when you received payments and how much they were
- Copy of the money order or check received
- Account number used to draw check payment
In addition, here is what is beneficial to keep if you are the one paying alimony:
- Copies of every check
- Document listing when you made each payment
- Receipts for all payments made in cash form
For the payer specifically, not having documentation that shows what you have paid may cause you to lose your tax deduction, and you might even have to pay your ex-spouse any payments not documented.
When dealing with alimony during a divorce proceeding, whether you are the recipient or the payer, you have the right to fight for your best interests, considering the facts of your case.