When getting divorced in New Jersey, a family court judge will order the division of marital property, allocate child custody, parenting time and more. Alternatively, a couple can sit down and negotiate agreements that fit their circumstances. However, making important financial decisions about spousal support and other matters without understanding the tax implications could bring some unpleasant post-divorce surprises.
Spousal support can start during the separation period and continue after the divorce is finalized. Not all payments made by one spouse to the other qualify as spousal support. To be regarded as alimony, spouses must file separate tax returns, and payments must be in the form of cash, money orders or checks. Furthermore, the payments must be made under a divorce decree, written separation agreement or a separate court order for maintenance, and it must be specified as spousal support or alimony.
If the spouses live in the same household during a legal separation under a divorce decree or separate maintenance order, payment will not qualify as alimony. Spousal support may not include any agreement or liability for the payer to continue making payments after the recipient’s death. Moreover, alimony payments must be entirely separate from property settlement and child support.
When it comes to the tax treatment of spousal support, the person making the payment may deduct it from his or her income on a tax return. Conversely, receiving alimony is regarded as income, and must be reported as such on the income tax return. Both parties must reference the payment or receipt of the money with the other party’s Social Security number or taxpayer identification number. An experienced divorce attorney can answer questions about spousal support in New Jersey.
Source: irs.gov, “Tax Treatment of Alimony“, Accessed on Sept. 5, 2017