It’s tax time and for people who were recently divorced and are paying or receiving alimony it’s time to consider the tax implications for 2006. Here are the general guidelines:
- Unfortunately, alimony payments received are taxable to you in the year you receive them. Your ex gets a break here. There is no tax taken withheld from alimony payments, so the tax burden shifts to you. The best way to handle this is to increase the amount withheld from your paycheck to account for the additional income.
- If you are paying alimony, remember to only do so as part of a decree or legal agreement. These payments will then be tax-free. Otherwise, payments made outside of a decree or agreements do not qualify as deductible alimony payments.
- Being a parent and making child support payments is never deductible. Child support always comes first and is not tax deductible. So, if you make a partial payment for some reason, the payment is applied to the child support payment first and is taxed and then alimony is secondary and non-taxable.
- If you paid or received alimony you must use Form 1040. You cannot use Form 1040A or Form 1040EZ. If you received alimony, you must give your social security number or you may have to pay a $50 penalty.