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Conditions exist for alimony payments to be tax deductible

During a Colorado divorce, a court may order one of the parties to pay the other alimony for the financial maintenance of the recipient. Support of this nature can be a significant expense for the paying party but in some cases, that individual may be able to deduct the payments from their taxable income. Likewise, recipients of alimony generally must report payments as income so that they may pay the taxes on those transfers of money.

In order for a paying party to deduct alimony from their taxable income, several conditions must exist. The payments must be made pursuant to a divorce and they must be made to or on behalf of the recipient. The payments cannot be classified as another form of support such as child support, and the payments must cease if the recipient dies.

Additionally, payments made in satisfaction of an alimony order must be made in cash or cash equivalents in order to qualify for this tax benefit. Also, in order for alimony to be tax deductible for the paying party they and their former spouse must reside in separate households and they may not file a joint 1040 tax form for the years in which deductions are sought.

Other stipulations may attach to the ability of a paying party to deduct their alimony payments from their taxable income and readers of this post are asked to seek their own counsel on this technical legal and financial matter. This post provides neither legal nor financial advice and as such it should only be read as an introduction to a case-specific, complex area of the law.

Source: marketwatch.com, "How to make your alimony payments tax deductible," Bill Bischoff, Aug. 15, 2017

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