When divorcing spouses in California come to an agreement regarding alimony, it's important that the order's language complies with the guidelines outlined by the Internal Revenue Service. If alimony orders are set up correctly, the payments may be deducted on the payor spouse's tax returns.
The Internal Revenue Service has outlined several mandates for deductible alimony. The agreements or orders must comply with all of the guidelines so that the alimony payments can be deducted. If the orders adhere to the guidelines, then the payor spouses can deduct the payments on their income tax returns.
People cannot deduct alimony payments unless they are making them under divorce orders or legal separation agreements. They must make the payments in cash or cash equivalents, and all of the payments must be made to their spouses or third parties on their spouses' behalf. Alimony that is designated as child support is not deductible. If there is a general support order, it's important for the agreement to specifically outline which monetary part is for alimony and which is for child support. If the ex-spouses continue living together or file joint returns, the alimony payments are not deductible. Finally, alimony must end upon the spouse's death.
If non-compliant alimony orders have been issued or agreements that don't follow the requirements of the IRS are already in place, payor spouses might want to consult with family law attorneys about post-divorce modifications of the existing orders or agreements. An attorney may be able to seek and obtain modifications so that the orders or agreements adhere to the IRS standards for deductible alimony. This may help spouses who are ordered to make the payments by letting them deduct the alimony on their returns.