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Tax consequences of alimony payments

Alimony, referred to as maintenance in Colorado, is often ordered when spouses divorce after a long marriage in which one spouse had significantly greater income than the other. Alimony can help the lower-earning spouse get back on their feet financially and acquire the education or skills needed to get a better job or re-enter the workforce.

Alimony payments are generally deductible by the payor and are considered income to the recipient. Not all payments from one ex-spouse to another are considered alimony. Before listing alimony as income or claiming it as a deduction, you should make sure the divorce decree in fact refers to the payment as alimony or spousal maintenance. For example, if the payment is actually an installment payment made in connection with the property settlement, it is generally not deductible.

Child support is not deductible. If a person is ordered to pay both child support and alimony, and that individual pays less than the entire amount required, the payment is allocated first to child support and any remainder to alimony.

For tax purposes it is important to keep good records of alimony payments made or received. Whether you are paying or receiving alimony, you should keep a document listing all the payments for each tax year, including the date and the amount of each payment. You should also keep a copy of all checks, and signed receipts for any payments made in cash. Although it is often recommended that you keep tax records for at least three years in case of an IRS audit, in the case of alimony paid or received it may be wise to keep the records indefinitely, in case your ex-spouse challenges whether you have paid the alimony ordered or claims you received more than you did.

The information in this post is intended to be general information only, and should not be considered legal advice. If you have questions related to your specific situation, it is best to consult an experienced Colorado family law attorney.

Source: Findlaw, "Alimony and Taxes," accessed Nov. 11, 2014

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