Divorce and Taxes: Ensuring Your Payments Qualify as Alimony

The following information is intended for educational purposes and you should speak with your CPA, Accountant or Tax Adviser before taking action.

There are basic rules that alimony recipients and payors need to follow to ensure their payments receive the proper tax treatment.

Definition: Alimony is a payment to a former spouse pursuant to a separation agreement.  A big tax advantage of alimony is that alimony is tax deductible for the payor and must be included in the recipient’s income.

To ensure your payments qualify as alimony, make sure the following are true:

1. Form of Payment: In order to qualify as alimony your payments must be made in cash, check or money order. The following is NOT a valid form of payment for purposes of alimony: transfers of property, performing services, allowing the recipient to use your property or transferring a debt instrument. 

2. Terms of Payment: Although this seems obvious, your separation agreement CANNOT state that payments are not alimony.

3. Living Arrangement: In order to qualify as alimony you and your spouse generally CANNOT occupy the same household.

4. Length of Payments: If you are obligated to make payments to your spouse’s estate after he/she passes, these payments will likely not qualify as alimony.

5. Child Support: If the payments under your separation agreement are defined as child support, then you likely CANNOT claim them as alimony.

As you prepare to file your taxes, take some time to sit down with your tax adviser to ensure you receive the full tax benefit of your alimony payments. IRS Publication 504: Divorce or Separated Individuals 2013 can further assist you as you prepare to file your taxes.

I wish you all the best,

Josh Robbins

Of Counsel

Scafidi, Juliano & Hurd, LLP

310 Washington Street, Suite 201

Wellesley, Massachusetts 02481

(T): 781-210-4710

(F): 781-210-4711

(E): jrobbins@sjh-law.com

Disclaimer:

This Blog/Website is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice (or any legal advice).  This blog is for general informational purposes only. Joshua N. Robbins, Esq. does not offer or dispense legal advise through this blog or by emails to or from this site. By using this Blog / Website you understand that there is no attorney-client relationship between you and the Blog/Website publisher.  The Blog/Website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction. This blog is not published for advertising or solicitation purposes. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon a Blog / Website. The information on the blog may be changed without notice and is not guaranteed to be complete, correct or up-to-date. While the blog is revised on a regular basis, it may not reflect the most current legal developments. The opinions expressed at or through the blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this site (including any links provided) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.

Advertisements

Essential Terms of the Offer

Massachusetts housing inventory remains low and projections for 2014 suggest that it will remain a Seller’s Market. Buyers need to be prepared to make an offer as soon as possible once they have found a property they love. In the current, time sensitive real estate market, Buyer’s are submitting offer’s without consulting with an experienced real estate attorney. Before you make an offer, please ensure that at least the following provisions are included:

1. Home Inspection: Buyer’s should ensure that a provision provides that the purchase is subject to at least a satisfactory home inspection before a certain date. However, depending on the nature of the property the Buyer may wish to include other inspection provisions. The date should be at least 7 days after acceptance of the offer.

2. Safe Harbor: If a Buyer or Seller does not wish to be bound by the terms of an offer if a Purchase and Sale Agreement (P&S) is not executed. They should ensure that there is a provision which specifies that the intent of the offer is to memorialize business points, creates only the obligation to negotiate in good faith towards a P&S by a certain date and that the offer does not create any other legally binding obligation on the part of either party.

Critical: This is an ESSENTIAL TERM as this will protect each party in the event that a P&S cannot be effectively negotiated after the offer is accepted.

3. Financing Commitment: Buyer should ensure that he has a sufficient period in which he can obtain a written commitment for financing (at least 30 days). However a Buyer should investigate funding and determine, at least preliminary, what they qualify for before an offer is submitted.

The P&S supersedes an offer and it is therefore not necessary to duplicate the terms of the P&S within the offer. However the terms of the offer should provide enough structure and protection to each party so that they can truly negotiate in good faith and work towards finalizing the transaction.

I wish you all the best,

Josh Robbins

Of Counsel

Scafidi, Juliano & Hurd, LLP

310 Washington Street, Suite 201

Wellesley, Massachusetts 02481

(T): 781-210-4710

(F): 781-210-4711

(E): jrobbins@sjh-law.com

Disclaimer:

This Blog/Website is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice (or any legal advice).  This blog is for general informational purposes only. Joshua N. Robbins, Esq. does not offer or dispense legal advise through this blog or by emails to or from this site. By using this Blog / Website you understand that there is no attorney-client relationship between you and the Blog/Website publisher.  The Blog/Website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction. This blog is not published for advertising or solicitation purposes. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon a Blog / Website. The information on the blog may be changed without notice and is not guaranteed to be complete, correct or up-to-date. While the blog is revised on a regular basis, it may not reflect the most current legal developments. The opinions expressed at or through the blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this site (including any links provided) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.