When the judge awards spousal support in your divorce case in Michigan, it is important for you and your former spouse to understand the federal tax ramifications. The Internal Revenue Service has very specific guidelines defining alimony and the deductions or taxes that each of you will incur as a result of those payments.
Voluntary payments and noncash property settlements are not considered spousal maintenance by the IRS and do not fall under the alimony tax guidelines. When your divorce decree includes an alimony agreement, it may be taxable if the following conditions are met:
- You do not live with your ex-spouse.
- You do not file a joint return together.
- A payment is made in cash and you or your ex-spouse is the recipient of the payment.
- The payments are only required while both of you are alive.
The person paying the alimony can include the amount as a deduction from income, while the one receiving it has to include the full amount as taxable income. The one who receives the payments can deduct them without itemizing deductions.
Child support and alimony are separate, even when your court order states that both must be paid, and child support is not deductible. If the total combined payment is not made, the child support payment is fulfilled first, and whatever is left over contributes to the required alimony payment and is subject to tax laws.
This information about how spousal maintenance may impact your federal taxes is provided for educational purposes only. It should not be taken as legal advice.