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Alimony can affect a recipient’s income tax liability

On Behalf of | Aug 11, 2016 | Alimony, Firm News |

Each April, Stockton residents must tabulate their earnings and submit their tax returns to the state and federal governments. Though many individuals are most concerned about whether they will owe more money in taxes or whether they will receive a refund, others may have questions about what income they must actually report in order to provide accurate records. Some forms of payments between current and former family members must be reported as income on an individual’s tax returns, and spousal support is one of those types of payments.

Spousal support or alimony is the payment of financial support from one former spouse to the other. Prior posts on this California family law blog have discussed the different ways that alimony may be paid; lump sum payments or period payments may satisfy the terms of an alimony order. However, when a party receives money from a former spouse through a support arrangement, that individual is usually responsible for paying taxes on the money he or she receives.

Since a receiving party must pay taxes on alimony, a paying spouse may deduct the sum of the payments from his or her taxable income when submitting state and federal tax returns. Money is generally only taxed once, and as such if one party is able to deduct it the other becomes liable for its taxation.

Unlike child support which is not deductible or considered income, alimony incurs tax obligations on those who receive it. Individuals who have concerns about what the receipt of alimony may do to their financial situations may wish to speak to their family law attorneys before agreeing to the terms of a support settlement or agreement. The information provided in this post is offered only as an information overview of a complex legal topic. Readers should not rely on its content as legal advice and are encouraged to seek the counsel of legal professionals for assistance with their personal matters.