Wednesday, March 16, 2011

Paying money to your ex? There is tax relief.

Generally, alimony you pay is deductible (even if you don't itemize) while alimony you receive is taxable income. Alimony received is considered earned income for purposes of contributing to an Individual Retirement Arrangement (IRA).

Report alimony received on Form 1040 line 11 and alimony payments can be deducted on Form 1040 line 31a. Income taxes are not withheld from alimony payments - you may need to make estimated tax payments or increase the amount withheld from your paycheck.

Child support payments are NOT alimony – these payments received are not taxable income and child support payments paid are not deductible.

For more information, review IRS Publication 504.

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