When the subject of alimony arises in a Tennessee divorce, the divorcing spouses usually focus only on one of two questions: "How much must I pay" or "How much do I get"? Only rarely do divorcing spouses consider the impact of federal income taxes on the payment or receipt of alimony. In this post, we will cover the essential tax consequences of alimony payments.
As a general rule, alimony payments must be included in the gross income of the party who receives the payments, and the payments may be deducted from the income of the spouse who is required to make them. Alimony payments must satisfy the following requirements to be deductible:
- The parties cannot file a joint tax return
- Payments must be in cash
- The payment must be received by or on behalf of the former spouse
- The divorce or separate maintenance decree cannot say that the payments are not alimony
- The former spouses cannot be members of the same household
- The payment is not treated as either child support or part of a property settlement