Spousal Maintenance and Your Taxes

Spousal Maintenance and Your Taxes

By: M. Scott Gordon

If you pay spousal maintenance (also commonly known as alimony), how does this affect your taxes? Under new Illinois divorce statute (effective January 1, 2016) (Public Act 09-0961), courts in Chicago and throughout Illinois now follow a formula for determining spousal maintenance if a couple’s combined income is less than $250,000. Just because there are now guidelines in place for ordering the amount and duration of spousal maintenance, however, does not mean that the way in which you file your taxes will look much different. To be sure, when you file your federal tax returns, you may be able to consider various forms of maintenance as alimony.

Spousal Maintenance Paid as a Tax Deduction

According to a tax topics guide from the Internal Revenue Service (IRS), any spousal maintenance (or, as the federal government describes it, “alimony”) paid is tax deductible. Specifically, taxpayers are instructed that they “may deduct from income the amount of alimony or separate maintenance” paid to the payee former spouse, and the payee former spouse “must include in income the amount of alimony or separate maintenance received.” What counts as spousal maintenance for federal tax purposes? In short, more than money paid under a final spousal support order can count as alimony or spousal maintenance when you file your taxes.

The guide makes clear that amounts paid under spousal maintenance or alimony final orders, as well as under certain separation agreements, can be considered alimony when it is time to file your taxes.

What Counts as Spousal Maintenance for Tax Purposes?

While spousal maintenance can provide a payor spouse with an opportunity for a tax deduction, there are limitations. The following must also be true in order to deduct alimony amounts from your income if you are a payor spouse:

  • You are not filing a joint tax return with your spouse;
  • You make the payment with money (not goods);
  • Your former spouse (or someone operating on behalf of your spouse) receives the payment;
  • You do not have any kind of court order specifying that the payment amount is not alimony or maintenance;
  • You are not living in the same household as the payee spouse at the time of the payment;
  • Your payment is not a property settlement;
  • You did not specifically agree in your divorce that you the payor former spouse would pay the tax; and
  • Your payment is not for child support.

What does not count as tax-deductible spousal maintenance? The guide lists the following:

  • Child support;
  • Property settlements that are not cash;
  • Any payments that are actually part of your spouse’s income under community property rules (since Illinois is not a community property state, this is not usually an issue for Chicago area and Illinois residents);
  • Payments to maintain property owned by the taxpayer;
  • Use of property; and
  • Voluntary payments (or, in other words, those not required by an order or settlement as maintenance).

Contact a Chicago Spousal Maintenance Attorney 

Determining what counts as alimony and what does not can be complicated, and situations can differ depending upon the persons involved. However, an experienced Chicago spousal maintenance lawyer can help you to better understand the implications of spousal maintenance payments. Contact Gordon & Perlut, LLC today to learn more about how we can assist with your case.