When couples in Springfield, Massachusetts either divorce or get a legal separation, one topic that might be an issue is alimony, that is, an ongoing payment from one member of the couple to the other as a form of ongoing financial assistance that, in theory, the person receiving the money would have received had the parties continued to live together.
There are tax consequences to alimony payments which both sides will need to think about as they are negotiating alimony with each other. While these consequences are best discussed with a qualified family law attorney in Massachusetts, there are some general pointers one can keep in mind.
Basically, alimony is charged as taxable income to the person who receives the payment, and it can be taken as a tax deduction by the person who makes the payment. As a word of warning, it is very important that any agreement pertaining to alimony strictly comply with the expectations of the Internal Revenue Service.
The bottom line of these regulations is that it has to be clear in the agreement that the alimony really is "alimony" and not something else, such as child support or a property equalization payment.
Massachusetts residents should also be aware that, unless things change, this system will change under the recent tax reform package. For new alimony orders after 2018, the payments will have no tax impact in that the payments will neither be deductible nor charged as income.
Negotiating alimony is an important component of a divorce or legal separation in Massachusetts, and it is equally important for those negotiating or requesting alimony to consider the tax consequences. A family law attorney can be very helpful with respect to answering any questions about current or future alimony payments.