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Are you required to claim alimony on your taxes?

Even though marriage signals the coming together of two people and divorce signals a separation, both events do have one thing in common: change. Many of the things that happen during marriage often happen in reverse for couples going through divorce like separating assets instead of conjoining them or moving away from each other instead of into the same residence.

But just as marriage brings up a number of questions, so too does divorce. One such question that can arise from divorce has to do with alimony and whether it should be claimed on a person’s taxes. It’s the title of this week’s blog post and a question we hope to answer for our California readers.

Are you required to claim alimony on your taxes?

The Internal Revenue Service, or IRS, defines alimony as payments made by one spouse to a former spouse as part of a divorce or separation agreement. Because earned funds are being transferred from one person to another, the IRS does require that the person who receives the alimony payment claim this amount as income on their taxes. The amount paid can then be deducted on the other spouse’s taxes.

How do you report or deduct alimony payments from your taxes?

This can be done by filing a Form 1040. Itemizing is not necessary for the spouse who is deducting the alimony payments, though both spouses may not file Form 1040a or Form 1040EZ because of the payments.

It’s important to note that the Social Security number or individual tax identification number of the spouse receiving payments is needed so that each person can properly deduct or claim alimony without risk of incurring a $50 penalty.

Source: Irs.com, “Alimony,” Accessed Aug. 5, 2014