Is Alimony Taxable? | Orange County Divorce Mediation

Is Alimony Taxable?

Yes.  According to the IRS, it is taxable to the recipient and tax deductible to the payor.  In other words, alimony shifts taxable income from one party to the other.

On another note, one fellow I recently spoke with said the IRS had sent him a letter audit because they thought he was paying too much spousal support.   I had never heard of this before, but it makes sense that the IRS would be looking for people avoiding paying income tax by shifting too much money to the other spouse.  More than likely they were looking for a possible asset buyout or attempt to masquerade child support as spousal support to get the income shifting effect.  I’m speculating at this point, but it is good to know that the IRS is actually on the lookout for such tactics.  I suppose the moral of the story is to favor guideline support and stay away from complicated support scenarios.

One final comment about alimony is that there needs to be an actual order from a court for it to be tax deductible.  Just because you and your spouse have a handshake agreement to pay $x in spousal support does not automatically make it tax deductible.  The IRS will look for a court decree, even a temporary order to substantiate the deductibility of the payments.  So protect yourself and your tax deductions by doing things the “legal” way.

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