Alimony has been renamed Maintenance and Spousal Support. It is a legal obligation on a spouse to pay the other spouse to provide financial support after a separation and/or divorce. Alimony, Maintenance or Spousal support can be either paid by either spouse to the other spouse to make up for the difference in income.
An Alimony calculator, Alimony calculations or Spousal Support calculations, is the process to determine how much is to be paid. These calculations differ from one state to another state. Some state have provided guidelines around this while others have not.
TAX IMPACT ON ALIMONY (SPOUSAL SUPPORT): It’s important to know when determining the amount of alimony or spousal support, it there is a tax difference between this and child support payments. When a spouse pay another spouse alimony, that spouse can deduct the payments, however child support payments cannot be deducted by the spouse that is paying. Additionally, the spouse receiving the alimony is required to claim this as income and pay taxes on the payments, while the reverse is true for child support.
- The payment must be in cash and not property.
- Payment must be made from one spouse to another specified in a divorce or separation document.
- The agreement cannot state that either the spouse receiving the money does not have to claim the income nor that the spouse paying deduct from their income, it is always deductible to the spouse paying and income to the spouse receiving.
- Both spouse cannot be living together when the payments are made.
- The liability for making these payments must end upon the death of either spouse.
- Payments cannot be made to the mortgage or towards taxes or insurance.
- Payments can be made to a mortgage for a jointly owned property.
- Under certain circumstances, the payments can be made to a third party. They are treated as payments for your spouse’s expenses.
- Part of community income, as explained in COMMUNITY PROPERTY pub. 504
- Payment’s made to keep up the payer’s property or use of the payer’s property.
IRS RECAPTURE RULE:
Spousal Support or Alimony is subject to the Recapture rule. The recapture rule changes the tax treatment of the payments made depending on other circumstances around the payments. If in the 3rd year the payments of Spousal Support (Alimony) is reduced by $15,000 from either the 1st to the 2nd year or the 2nd year to the 3rd year, and the payment reduction coincide with a child support payment reduction, the IRS will classify the Spousal Support paid as Child Support. If the spouse receiving the support dies or remarries, the recapture rules do not apply. They also do not apply if specified in a temporary order. Lastly, the rules don’t apply if the payments fluctuate due to reasons out of control for the paying spouse, such as a business or other item that the payments were based on.
CONSIDERATIONS FOR DETERMINING AMOUNT AND HOW LONG:
In the most of the states, the amount is based on the judge’s opinion and there are no specific calculations. You would need to refer to the specific laws of that state to see if there are guidelines around the amount and length of time paying.
Here are some possible guidelines your state may use when calculating alimony:
- The number of years you are married
- The ability of the receiving spouse to work
- The ability of the paying spouse to make the payments
- The age, physical and emotional health of both of the spouses
- The contributions each spouse made to the marriage from a financial and non-financial way
- The education, skills and ability to be employed for the receiving spouse
- The split of assets in the divorce
- There are no more “no fault” states, so fault is not a factor anymore. New York was the last state to become a “no fault” state.
These guidelines are reviewed in each divorce case and cannot be compared to other cases. Each divorce is different depending on the factors mentioned above.
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