What Is Alimony and How Does It Work? How It Affects Your Taxes

Alimony, also known as spousal support or maintenance, is a legal obligation on a person to provide financial support to their spouse before or after marital separation or divorce.

Consulting with a divorce attorney
Consulting with a divorce attorney [PHOTO COURTESY OF BLOG WORTHY]
The purpose of alimony is to help ensure that a divorce does not cause a drastic decline in quality of living for a lower earning spouse–especially if the couple has been married for a long time and there is a large discrepancy in earning power between the two spouses.

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Types of Alimony

There are different types of alimony that may be awarded depending on the circumstances of each case. Some of the common types are:

Temporary alimony

This is alimony that is paid while the divorce is pending or until a specific event occurs, such as the completion of education or training for the recipient spouse.

Temporary alimony is also sometimes called pendente lite alimony or interim alimony.

Rehabilitative alimony

This is alimony that is paid for a limited period of time to help the recipient spouse become self-supporting by acquiring new skills, education, or work experience.

Rehabilitative alimony is also sometimes called bridge-the-gap alimony or transitional alimony.

Permanent alimony

This is alimony that is paid indefinitely or until the death or remarriage of either spouse.

Permanent alimony is usually reserved for long-term marriages where the recipient spouse has little or no earning potential due to age, health, or other factors.

Permanent alimony is also sometimes called durational alimony or indefinite alimony.

Lump-sum alimony

This is alimony that is paid in one single payment instead of periodic payments.

Lump-sum alimony may be ordered as a way of finalizing the property division between the spouses or as a way of avoiding future disputes over alimony payments.

Factors Affecting Alimony

The laws governing alimony vary from state to state, but most states consider several factors when determining whether to award alimony, how much to award, and for how long to award it.

Some of the common factors are:

The length of the marriage

Generally, the longer the marriage, the more likely alimony will be awarded and the longer it will last.

The income and earning capacity of each spouse

The court will compare the income and potential income of each spouse and consider their ability to maintain the standard of living established during the marriage.

The age and health of each spouse

The court will consider the physical and mental condition of each spouse and how it affects their ability to work and support themselves.

The contribution of each spouse to the marriage

The court will consider the non-monetary contributions of each spouse, such as homemaking, child care, education, and career advancement of the other spouse.

The conduct of each spouse during the marriage

The court may consider any fault or misconduct of either spouse that led to the breakdown of the marriage, such as adultery, abuse, or abandonment.

The needs and expenses of each spouse

The court will consider the reasonable needs and expenses of each spouse, such as housing, food, clothing, medical care, education, and entertainment.

Tax Implications of Alimony

The tax treatment of alimony changed under the Tax Cuts and Jobs Act (TCJA) of 2017.

For divorces finalized before January 1, 2019, alimony payments are deductible by the payer and taxable to the recipient.

For divorces finalized after December 31, 2018, alimony payments are not deductible by the payer and not taxable to the recipient.

However, couples who divorced before 2019 can still opt for the old tax rules if they modify their divorce agreement after 2018.

Modification and Termination of Alimony

Alimony orders can be modified or terminated by the court if there is a substantial change in circumstances that affects the ability of either spouse to pay or receive alimony.

Some examples of such changes are:

1.A significant increase or decrease in income or earning capacity of either spouse
2.A remarriage or cohabitation of the recipient spouse with another person
3.A retirement of either spouse
4.A serious illness or disability of either spouse

To request a modification or termination of alimony, either spouse must file a motion with the court that issued the original order and provide evidence of the change in circumstances.

The court will then review the motion and decide whether to grant it or not.

Conclusion

Alimony is a complex and often contentious issue in divorce cases.

It involves many legal and financial considerations that vary depending on each state’s laws and each couple’s situation.

Therefore, it is advisable to consult with an experienced family law attorney who can advise you on your rights and obligations regarding alimony and help you negotiate a fair and reasonable settlement.

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