When a Florida family goes through a divorce, ongoing payments are often made from one party to the other. Those payments are usually classified as either child support or alimony. It is important to understand, however, that there are instances in which payments may not fall under either category, making it hard for the paying party to claim them on his or her taxes.
In order for a payment to be considered alimony, it must meet certain requirements. To begin, the payments must be made after a divorce has been made final or a separation agreement or court order has been filed. The payments must be in cash (or through checks or money orders) and there can be no obligation to continue making payments after the recipient’s death. Payments must also not be voluntary, meaning that they must be governed by an official order or agreement, and not just pass from one party to the other on an arbitrary basis.
In order to be included on a tax return, payments cannot be child support. Money that exchanges hands is also not alimony if is paid to address specific items in the divorce agreement. For example, if a husband is permitted to live in one of the couple’s homes without paying for rent or upkeep, then the value of that rent and the cost of maintaining the property do not qualify as alimony.
When negotiating a Florida divorce agreement, it is important to understand how payments that are exchanged between a former husband and wife are classified. If having the ability to deduct alimony on one’s taxes is important, then the agreement should clearly outline that payments are to be considered alimony. That seemingly minor detail can make a big difference when the time comes to pay one’s annual taxes.
Source: Forbes, “Ask The Taxgirl: Are Payments Made To An Ex Always Alimony?“, Kelly Phillips Erb, July 23, 2017