|Alimony - Spousal Maintenance|
Alimony is the amount of money one spouse pays to the other, by court order, for support and maintenance.
Alimony also referred to as maintenance or spousal support traditionally was awarded to the wife and paid by the husband. Today alimony is awarded to either spouse in an effort to maintain the standard of living that both parties were accustomed to during the marriage.
When alimony is awarded prior to the divorce it is called pendente lite alimony.
Alimony is always taxable income to the recipient and tax deductible to the payor.
At the time of the divorce if alimony is awarded it can be one or a combination of the following:
Generally the following factors may be considered:
In addition to the above, the judge may take into consideration ANY economic circumstances of either party that they deem to be just or appropriate.
Alimony payments generally are calculated based on the above considerations. As with all aspects of your divorce, whenever possible it is always best to negotiate alimony rather than have a judge arbitrarily determine if your situation is one that will include alimony and how much will be awarded.
Every state has different statutes regarding the award of alimony. Therefore it is imperative that you consult an attorney that specializes in divorce before making any decisions regarding alimony.
Alimony and Taxes
You should be aware of the Recapture rule for alimony. It can get complicated so consult a tax accountant if you think you are impacted as either a payor or a recipient of alimony.
IRS Publication 504 states the following about the Recapture of alimony:
If your alimony payments decrease or terminate during the first 3 calendar years, you may be subject to the recapture rule. If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Your spouse can deduct in the third year part of the alimony payments he or she previously included in income.
The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Do not include any time in which payments were being made under temporary support orders. The second and third years are the next 2 calendar years, whether or not payments are made during those years.
The reasons for a reduction or termination of alimony payments that can require a recapture include:
You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. When you figure a decrease in alimony, do not include the following amounts: