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Steps to ensure that alimony is deductible

Spousal support may be an issue in many divorces in New Jersey. When there is a substantial disparity in the incomes of divorcing spouses, judges may order the higher-earning spouses to pay spousal support to the lower-earning spouses for specific durations or for indeterminate periods.

When higher-earning spouses expect to have to pay spousal support to their spouses, it is important that they take steps to ensure that they will be able to deduct the payments that they make. The amounts that are paid in alimony are deductible by the payers and are reportable income by the payees. In order to be able to deduct the alimony that is paid, it is important that it is set up in a way that conforms with the Internal Revenue Service's regulations.

In order to be deductible, alimony payments must be made under a separation or divorce agreement. The payments must either be made to third parties on behalf of the ex-spouses or to them directly. The payment obligation must end upon the recipient's death, and it cannot be considered to be child support. Alimony payments must also be made in cash or cash equivalents, and the recipients may not continue to live in the same homes or file joint returns with the payers. Finally, the divorce agreement cannot specifically exclude the payments as alimony.

Alimony may be an important issue during divorce negotiations. people who expect to be ordered to pay spousal support may want to negotiate agreements that limit the duration or the amount of the payments. They may also want to make certain that the language in their agreements clearly indicates that the amounts that they pay qualify for the deduction. Experienced family law attorneys may help in this regard.

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