If you’re getting alimony payments, don’t forget that you have to pay taxes on them. They still count as income.
It doesn’t matter how you’re paid. For instance, maybe your ex was ordered to pay you $5,000 per month, and he or she just shows up once a month with a check or an envelope full of cash. You then have to report that money on your income taxes at the end of the year.
In fact, you may need to estimate your payments and pay in quarterly installments. You stand to make $60,000 over the course of the year, and that’s without even considering your actual job. There are forms you can use to split that up into four quarterly payments, and then you’ll either pay the rest when taxes are due, or you’ll get a return if you estimated too high.
One big tripping point, some experts warn, is that people think the payments don’t count if they don’t get any cash. They figure this is a way around the taxes.
For instance, maybe your ex has to pay $2,000 per month. That’s exactly what you owe your mortgage lender on the home you bought after the divorce. You set it up so that your ex just pays the mortgage for you, and then money never changes hands.
While it’s find to handle the payments this way to make things more convenient, that doesn’t mean it’s not income. You still have to report the $2,000, just like you would if your ex wrote you a check and then you wrote one to the mortgage lender.
Post-divorce financial situations can be complex. Be sure you know all of your legal rights and obligations during divorce, no matter which side of the equation you’re on.
Source: iGrad, “You’ve Heard of Adding Insult to Injury? Well Just Look at the Financial Effects of Alimony,” Melissa Horton, accessed Aug. 23, 2017