Paying Taxes on Alimony When Ex-Spouses Remain in The Same Household

Divorce typically results in one ex-spouse vacating the home - but not always. If both parties still live in the same household, this generally will affect the ability to file taxes and how each ex-spouse will do so separately with the tax deductions on spousal support.

Taxes on Alimony

In the normal circumstances where a spouse divorces another spouse, there is a judgment from the court that alimony will pay the individual with less income brought into his or her household. Alimony for both parties before 2018 could provide tax deductions when paying and receiving depending on the state and circumstances. These deductions are important for the person receiving alimony because of the bump to income in the year which may require additional taxes paid. Through the factors for paying and deducting taxes from alimony or income for the year, the Internal Revenue Service requires certain elements to exist. This may include living apart from an ex-spouse or paying separately when divorced.

Criteria per the IRS to Deduct

To ensure that the person is able to deduct alimony payments from taxes, he or she must meet the IRS criteria. These include paying in some form of cash or cash equivalent, filing a separate tax return for each spouse and a requirement in the divorce agreement to pay spousal support. The funds sent to the spouse must cover alimony only and not child support. Additionally, the IRS does not support these deductions if the spouses live in the same house as well as an exclusion to pay once the spouse is no longer alive.

For usual deductions, the individual paying alimony must not designate property as part of the settlement for these specific types of deductions. The IRS requires some cash equivalent form of spousal support. Child support of any type is not an inclusion even if paid to the custodial parent. Making arrangements between the parents that are not within the criteria necessary to receive deductions may disqualify the person immediately. It is important to check with a tax professional or lawyer to understand and proceed with filing the correct forms and placing all relevant information on the returns’ paperwork.

Exclusions to Deductions

Other than child support, the individual cannot claim noncash settlements for spousal support to include forms of property such as a house. Any payments that the person makes to maintain the original marital home, up to and including the spouse living in the same house, do not receive inclusion in alimony deductions. Other exclusions include voluntary payments the individual gives the other party that are not part of the divorce judgment or divorce settlement. This does not include a lump sum which usually does have sections for deductions, but gifts of money or other kinds of payment given outside of the mandate of the courts are not part of these deductions.

Filing Separately

Filing a federal tax return for the year as a single person or separately when married is possible. It is even possible to file separately when living together either as a married couple or when already divorced. However, the alimony tax deductions may not exist no matter what state the person lives in when both ex-spouses share the same household. Staying in the marital home with the ex-husband or ex-wife generally removes the need to separate the funds because most bills will go to both parties with a sharing of all expenses. Then, deductions for alimony are not necessary.

Penalties for Living in the Marital Home

If both parties remain in the same or marital home, it is possible that the IRS may incur penalties or follow through with criminal charges if there are any inaccuracies on the tax return forms. It is important to disclose that both ex-spouses live in the home they shared before completing the divorce. If either fails to place these details on the tax documents, the IRS may enforce penalties that could become costly or proceed with criminal charges for tax fraud. Then, either or both parties will need to hire a lawyer for a criminal defense.

Legal Assistance for Alimony Tax Deductions

It is a tax lawyer that may become the necessary legal professional when facing alimony tax deductions. He or she may need to explain the matter and ensure that all paperwork is free of violations and inaccurate details. If needed, he or she may present the case in court.

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Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws they may affect a case.

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