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How are taxes handled for alimony?

When you are ordered to pay alimony or if you have an order to be paid alimony in Texas, one thing you have to pay attention to are your tax obligations at the federal level. The IRS has very specific rules for what you must claim when paying or receiving alimony. Not meeting your tax obligations can lead to serious fines and penalties that can really add up.

To begin with, the IRS may define alimony a little different than the court has defined it or how you see the situation. Payments that are made but were not ordered under a divorce agreement are not alimony, such as a payment you make before the court has ordered you to pay. Noncash payments or payments to for property use or upkeep are also not categorized as alimony. Any payment from community property income is also excluded. Finally, child support is never considered alimony.

The payments you make or receive must have been ordered in a divorce agreement and declared to be spousal support. They cannot be part of a property settlement,and payments must stop upon death of one of you. In addition, you cannot file taxes jointly or live in the same household. Finally, payments must be made by cash, check or money order.

Anything that meets the spousal support requirements must be reported on your taxes. If you receive the payments, it is considered income. If you pay, then it is considered a deduction. This information is only intended to educate and should not be interpreted as legal advice.