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When alimony isn't actually alimony

If payments qualify as alimony, they may be counted as income to the person who receives it and a tax deduction for the person who makes the payment. However, it is important for Kentucky residents to understand that not every payment in a divorce is classified as alimony. For instance, child support payments are not considered income or considered deductible for federal income tax purposes. Payments that are labeled as anything other than alimony are also not alimony for tax purposes.

A payment must be made in the form of cash or something similar like a check or money order. Payments must also be made to a person who is not sharing a household with the payee. The recipient must file their taxes separately from the person who makes the payment. Furthermore, money given to a spouse or former spouse is only alimony if it is made under a separation or divorce agreement or similar agreement.

As a general rule, there must be some unambiguous statement saying that a payment is meant to be alimony. If there is no such statement, it may be necessary to look at state law to see if a payment should be labeled as alimony. If state law doesn't provide a clear answer, the payment is generally considered not to be alimony, and it may lose its tax-advantaged status.

Alimony is designed to help a lower-earning spouse make ends meet after a divorce. It may also be used to help a spouse with less money or assets live a lifestyle similar to the one experienced during the marriage. Divorce agreements might use alimony in conjunction with child support payments to meet a child's best interest. An attorney may be helpful in answering questions about this topic.

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Dietz & Overmann, PLLC
130 Dudley Road Suite 150
Edgewood, KY 41017

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