Alimony is spousal support provided after a divorce. It can be a real source of contention and can seriously derail what could otherwise be an amicable split. Keeping track of your alimony payments, following the rules, and being honest in your dealings with your ex-spouse and the IRS will make alimony a much easier issue to deal with. Familiarize yourself with the alimony process in order to foster harmony and financial success.
Factors for Consideration
How much alimony is to be paid and to whom will be determined based on various factors of your financial lives together as a married couple. Some of the factors for consideration include:
- Length of the marriage.
- Type of lifestyle the couple enjoyed.
- Marital arrangements.
- Education level of each spouse.
- Income level of each spouse.
- Whether each spouse is capable of being self-sufficient.
A Beneficial Balance
While it seems like alimony is beneficial only to the recipient of the payments, this isn’t necessarily true. Alimony payments are tax deductible for the payee and are taxable income for the recipient. The tax benefits of paying alimony can be substantial, so it’s not all detrimental for the payee. Striking the right balance between payer and recipient can make the situation beneficial for both parties in many cases.
The Difference Between Alimony and Child Support
There is often some confusion regarding alimony because parties assume that it is similar to child support. There are some important distinctions between the two that need to be regarded. Alimony is viewed as taxable/deductible income. The court order regarding these payments needs to be strictly adhered to in order to avoid problems with the IRS. Child support is more fluid and can be added to when the situation calls for it, as long as minimum payments are met.
Types of Alimony
Alimony is not a one-size-fits-all tool. There are different types of alimony and they can be adjusted to suit each individual situation. The basic types of alimony are:
- Temporary: This type of spousal support is paid during separation and/or divorce proceedings. It can cover divorce costs and will be re-evaluated upon finalization.
- Permanent: These payments are awarded upon finalization of a divorce. They are recurring and indefinite. They are usually contingent upon factors like remarriage or cohabitation.
- Rehabilitative: This type of alimony is provided to a spouse while they engage in higher education or in job training. This will be provided for a fixed period of time, during which the recipient is expected to work on becoming more self-sufficient.
- Lump-Sum: This type of alimony is received in a one-time payment. It is most common in situations where one party doesn’t want any property from the marriage and instead settles for a one-time, cash payment.