What is and isn’t considered alimony for tax purposes?

When many Maryland couples divorce, one party is forced to pay spousal support to the other. This is to even things out financially when the marriage ends, especially if one spouse earns a lot more than the other. However, figuring out what constitutes alimony is not as easy as one would think. While some people write a check directly to their former spouse every month, others make mortgage or life insurance payments that could qualify as alimony for income tax purposes. Read on to find out what is considered alimony.

After a divorce, one spouse may be responsible for paying some bills. However, not all of these payments are considered alimony. For example, child support is not alimony and is therefore not tax deductible. Any non-cash settlements are also not classified as spousal support. Any money the payer spends on maintaining his or her own property is also not considered alimony.

Some third-party payments, however, may be considered alimony. For example, if you pay for your former spouse’s tuition, medical insurance, or taxes, then you may be able to claim these expenses on your tax return. If your spouse lives in the marital home and you pay a portion of the mortgage, taxes, and insurance, then you may be able to deduct 50 percent of these expenses as spousal support. In addition, if you are forced to keep your former spouse as a beneficiary on your life insurance policy, then the premiums may be considered alimony.

It’s important to understand what qualifies as spousal support for tax purposes since certain deductions are not allowed and a person can even be penalized for filling out tax forms incorrectly. If you are paying or receiving alimony, contact a tax professional to understand your obligations.

Source: IRS, “Alimony,” accessed Mar. 28, 2015