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How do alimony payments affect your taxes?

Many states have moved away from using the term "alimony" for court-ordered payments from one former spouse to another to provide financial support in cases of separation or divorce. But whatever these payments are called -- alimony, spousal maintenance, spousal support or something else -- they do have tax implications.

How do alimony or spousal support payments affect taxes? In this post, we will address that question.

The short answer can be summarized in two statements. Payments that are classified as alimony for federal income tax purposes can be claimed as a tax deduction by the spouse or former spouse who pays them. For the spouse or former spouse who receives them, the amount is considered income and must be included on a tax return.

It is important to be clear, however, that just because a payment was made to a spouse or former spouse under a divorce or separation agreement doesn't mean the payment is considered alimony for federal tax purposes. For example, child support payments are not alimony payments and cannot be deducted.

If you are getting divorced and are uncertain how payments should be categorized, you should discuss this with your attorney.

Of course, in practice sometimes recipients of alimony don't always claim it as income when they should. Last year, the Treasury Inspector General for Tax Administration (TIGTA) issued a report that found a large discrepancy between the amount of alimony deducted on taxes and the amount reported by recipients as income.

According to TIGTA's report, this gap was a whopping $2.3 billion.

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