Alimony, also known as spousal support, is an amount paid from one spouse to another following a divorce. A judge may order alimony payments for a specified period of time or until the spouse receiving support remarries. Alimony is generally intended to help the spouse receiving it maintain a similar lifestyle to the one they were accustomed to during the marriage.1 Alimony is not granted automatically—the spouse needing the alimony has to ask for it.
Tax Treatment of Alimony Payments
How you treat alimony for tax purposes depends on whether you pay it or receive it and when your divorce was finalized. If your divorce agreement was finalized prior to December 31, 2021 and you make alimony payments to your ex-spouse, those amounts are tax-deductible. That means you can deduct the alimony you’ve paid from your taxable income for the year, yielding a tax break.
On the other hand, if you’re receiving alimony payments, you must claim them as taxable income on your return. Again, this only applies if your divorce agreement was finalized before December 31, 2021.
IRS Rules Regarding Alimony
The IRS has several requirements that must be met for spousal support payments to be considered alimony, and therefore, deductible for divorce agreements finalized before December 31, 2021.
To qualify as alimony, ex-spouses must meet these criteria:
• They cannot file a joint tax return.
• Payments must be made in cash, by check, or money order.
• Payments must be owed under a divorce or separation agreement.
• The divorce or separation agreement doesn’t categorize the payments as not being alimony.
• Spouses must not live in the same household when payments are made.
• There’s no liability to continue the payments if the receiving spouse dies.
• Payments aren’t treated as child support or a property settlement.
If you’re eligible to deduct alimony payments you made, you can do that on your Form 1040, using Schedule 1. You’ll need to enter your former spouse’s Social Security number or individual taxpayer identification number on the form. Otherwise, the IRS may disallow the deduction. If you’re receiving alimony and it’s considered taxable income, you’d also report that on Form 1040, Schedule 1. And you too will need to include your former spouse’s Social Security number or taxpayer identification number.
What Determines Alimony Payments?
Alimony isn’t one-size-fits-all; the courts can use a number of factors to shape payment amounts, including:
• Each spouse’s income and employment situation
• Their individual living expenses
• How assets were divided in the divorce
• The length of the marriage
• Each spouse’s age
Alimony can be modified after the divorce in certain situations. For example, if the paying spouse loses their job they can ask the court to reduce the payment amount. And likewise, if the spouse receiving alimony sees their cost of living increase they can ask the court to order a higher support payment.
Alimony vs. Child Support
The key difference between alimony vs. child support is the intended use of each payment.
Alimony is paid for the benefit of a spouse; child support is paid for the benefit of any children resulting from the marriage.
Child support is designed to be used to meet the basics needs of the child. That includes things like food, clothing, medical care, housing, and other necessities.
Tax Treatment of Child Support
Because child support is intended to benefit the children, it’s not considered taxable income for the person who receives it. Child support payment is also not deductible for the parent who provides it.
IRS Rules Regarding Child Support
As child support is neither tax-deductible nor taxable income, there are no reporting requirements for making or receiving payments. Parents do, however, need to take care when claiming children as dependents on their taxes. Generally, the parent that the child lives with for the greater part of the year is the custodial parent for tax purposes. This parent is able to claim the child as a dependent, assuming the rules for claiming dependents are met. The non-custodial parent can, however, claim the child as a dependent if a separation agreement or divorce decree specifies that they can. The custodial parent has to sign Form 8332 authorizing the release of their right to claim the child as a dependent.
What Determines Child Support Payments?
Whether child support is court-ordered and in what amount largely depends on the finalized custody agreement and state law.
For example, some states may not order support if both parents earn similar incomes and share custody equally. Or, some states may base support on the number of children in the household and the non-custodial parent’s income.
Types of Spousal Support
Not all spousal support is the same—the amount and duration of alimony will depend on the specific facts and circumstances of your case. Most states offer different types of spousal support, including:
• rehabilitative support
• temporary support
• lump-sum support, and
• permanent support.
Rehabilitative alimony is typically granted to spouses who don’t yet have the job skills or education to enter the workforce and earn enough money to support themselves. Put simply, the idea behind this type of alimony is to provide an unemployed spouse the necessary time and financial assistance to become self-supporting. The duration of rehabilitative spousal varies, depending on the facts of each case, but it’s generally temporary and can be reviewed at the end of the term.
From beginning to end, a divorce can take some time to complete and typically requires one spouse to move out of the marital home. During this time, spouses must continue paying the rent or a mortgage, property taxes, and other joint bills and expenses. To address these financial concerns, a judge may order temporary spousal support to the lower-earning spouse in order to maintain the status quo and cover basic necessities during the divorce proceeding. This type of alimony ensures that both parties can financially support themselves through the process.
Lump-sum support is a way for a paying spouse to alleviate the long-term requirement of monthly payments after the divorce. Lump-sum alimony is a fixed amount that can’t be modified later and is paid up-front, so the recipient spouse doesn’t need to wait for a monthly check. The court will typically determine what the total monthly future payments would be after the divorce, and order a lump-sum payment equal to that amount.
Permanent spousal support typically continues until the recipient remarries or dies (or the paying spouse dies). Some states terminate permanent spousal support if the recipient cohabitates with a new partner, but each state has specific rules for cohabitation and alimony. Courts typically reserve permanent spousal support for long-term marriages where there is a large discrepancy of income.
Spousal Support Factors
Each state has specific spousal support factors for the judge to evaluate. Unlike child support, which the court usually determines by a formula, most judges have broad discretion on whether to award spousal support and if so, the amount and duration of the assistance.
Typically, courts will evaluate:
• the length of the marriage
• each party’s ability to work
• both spouse’s health and age
• the financial status of each party after the divorce
• the recipient’s need for support and the paying spouse’s ability to pay
• general principals of fairness, and
• how each party behaved during the marriage (in some states).
If you’re going through a divorce and need alimony, or if your soon-to-be-ex is requesting financial support, consult with an experienced family law attorney before you proceed.
How Courts Set the Support Amount
Leaving a support decision in the hands of a judge is risky business. This isn’t like child support, where the formulas are clear and pretty rigid. In most states, the amount and duration of spousal support payments are entirely up to the judge. Obviously, it’s preferable for you and your spouse to keep control of decisions about spousal support. If the two of you can agree to an amount of support and how long it will be paid, then that’s what the judge will order. It’s the only way to predict what’s going to happen. Only about a dozen states give judges even general guidelines for calculating support. In these states, the judge uses a formula that takes into account the length of the marriage and the spouses’ respective incomes to calculate a starting figure. Then the judge factors in other circumstances to arrive at a final amount and decide how long the payments will last.
Need and Ability to Pay
Once the court decides that one spouse is entitled to support, it will try to quantify that need and the other spouse’s ability to pay. The judge may take into account:
• how property is being divided in the divorce
• the standard of living during the marriage, and the dependent spouse’s ability to maintain that standard in the absence of support
• each spouse’s separate income, assets, and obligations (states define “income” differently, with some including unearned income and others limiting the definition more strictly)
• the length of the marriage (more significant in deciding how long support will last than in determining the amount)
• whether the spouses lived together before they were married and whether any part of the cohabitation should be included in the length of the marriage
• each spouse’s age and health
• the needs of the children, and whether child care responsibilities affect the dependent spouse’s ability to return to work
• whether the dependent spouse left the workforce to be a homemaker or raise children
• how long the dependent spouse has been out of the workforce, that spouse’s marketable skills, and what retraining might be necessary
• contributions that either spouse made to the other’s training, education, or career advancement
• the possibility that either spouse may acquire assets in the future (such as the maturing of stock options or a large inheritance), and
• any other factors that the judge thinks should be considered.
In addition to looking at actual income, a judge may examine each spouse’s ability to earn money. The idea here is that if you could earn significantly more than you are, but voluntarily choose a lower standard of living, your spouse shouldn’t have to suffer financially because of it.
If either you or your spouse has skills or education that you are not using—for example, if you are trained as a lawyer but are working as a sculptor—the court can “impute” to you a higher income than what you actually have. You may be ordered to pay support consistent with your earning power, not your actual income. And if you’re the recipient spouse, you might get support that’s consistent with your ability to earn, rather than what you actually earn—or you may be ordered to fend for yourself.
In some states, you can argue that fault should be considered in setting spousal support (you can make this argument whether or not you filed for divorce on the basis of fault). If the higher-earning spouse committed adultery, was abusive, or is for some other reason at fault for the divorce, the support payment may be increased. Of course, as the saying goes, you can’t get blood from a turnip. If there’s only a certain amount of support that your errant spouse can afford, the court won’t order an unrealistically high payment. More commonly, the spouse who receives support has payments reduced because of fault.
Beyond Spousal Support
Spousal support is usually just a temporary measure, designed to keep one spouse from running into financial trouble immediately after a divorce. Even if you’re receiving support, you are ultimately responsible for your financial future. Make a one-year, three-year, and five-year plan for where you want to be in your life, and include what kind of work you want to be doing and what you want in terms of salary and benefits. If you received significant property or other assets in the divorce settlement, invest them wisely and with an eye toward the future. Learn to budget, if you haven’t yet.
Understanding Child Custody
For many parents, figuring out child custody is one of the most difficult and most important parts of a divorce. When children are involved, either the court must decide or the parents must agree on how to handle issues like whether and how custody will be shared, who will make decisions for the kids, and how visitation will work.
Types of Custody Arrangements
There’s no one-size-fits-all custody arrangement; the terms of your final custody plan are supposed to be tailored to meet the needs of your family. The final custody order should normally address both physical custody (which parent the child lives with) and legal custody (which parent has the right and obligation to make decisions about the child’s upbringing).
Most custody orders divvy up custody in one of the following ways:
• sole legal custody and sole physical custody to one parent
• sole physical custody and joint (shared) legal custody
• joint physical custody and joint legal custody, or
• sole legal custody and joint physical custody (rare).
When an order specifies that one parent has sole physical custody, the judge will typically create a visitation schedule to ensure the child has the opportunity to enjoy a meaningful relationship with the noncustodial parent.
How Courts Make Custody Decisions
Almost all courts use a standard that gives the “best interests of the child” the highest priority when deciding custody issues. What a judge considers to be in the best interests of the child depends on many factors, including:
• the child’s age, sex, and mental and physical health
• each parent’s mental and physical health
• each parent’s lifestyle and other social factors,
• the emotional bond between each parent and child, as well as each parent’s ability to give the child guidance
• each parent’s ability to provide the child with food, shelter, clothing, and medical care
• the child’s established living pattern (school, home, community, religious institution)
• the quality of the child’s education in the current situation
• the impact on the child of changing the status quo, and
• the child’s preference if the child is mature enough to express an opinion.
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