Making tax-deductible alimony payments

If a Nevadan owes alimony to a former spouse, that support might be tax-deductible. According to a decision by the U.S. Tax Court, however, the payment can only be deducted if it's specifically mentioned in a divorce or separation agreement.

The man whose case went before the tax court failed to specify a certain spousal payment. He and his wife had divorced in 2007, but before the divorce, he paid her a portion of a bonus he earned in 2006. The two signed an agreement regarding the payment of the bonus and how he would claim it on his taxes. A later spousal support order specified that he would pay temporary support in the amount of $3,270 per month plus a percentage of his monthly income if it went above $12,500. The spousal support order did not mention the bonus, so the tax court decided that he could not claim it as a deduction.

A few other elements are necessary for alimony to be claimed as a deduction. The separation or divorce agreement must not specify that the payments are nontaxable or nondeductible, the two people must live in separate households, and the death of the recipient must put an end to the payments.

Spousal support may be awarded if one person never worked outside the home or had a significantly lower income than the other. There are also other situations in which spousal support may also be deemed appropriate. For example, a person may have made significant sacrifices to support a spouse who trained for a high-income career. Alimony might be paid temporarily, or it could last until the recipient remarries or dies. A couple may negotiate alimony stipulations with a lawyer and have a judge approve it to make it legally binding.

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