Alimony and Taxation in a Georgia Divorce

Alimony or spousal support is the financial assistance provided by the financially independent spouse to the dependent spouse so that she can gain marketable skills to support herself in the future. The state of Georgia recognizes three types of alimony. These are permanent alimony, rehabilitative alimony and temporary alimony.

Permanent alimony is extended to spouses until their death or until they remarry. Those spouses who had given up their career to look after home and children find themselves at odds during a divorce since they would not be having any work experience to land themselves a job soon. Such people would need time to hone their skills and look for employment. Rehabilitative alimony is awarded to such spouses. This is not permanent and would be discontinued after a pre determined time period. Another form of short term alimony is paid during the course of divorce proceedings. Once the divorce is finalized the terms and conditions regarding spousal support as mentioned in the marital agreement is binding on both spouses.

There are certain conditions wherein spouse is not eligible for alimony and these are adultery and desertion. Fixing the alimony is a decision taken after much consideration and evaluating many factors such as, duration of marriage, marital conduct, financial situation of both spouses, contribution of each towards marital estate, age and health, standard of living, time required for gaining new skills etc.

Payment of alimony has tax advantages for the spouse who pays them. The IRS allows deduction in most cases. This is because; the spouse who receives the alimony pays taxes on it. But altogether the amount of tax paid by paying spouse is less since, they shift their income to lower tax bracket once the alimony amount is deducted. There are certain restrictions on this rule too. All alimony payments do not qualify for tax deductions. Those seeking deduction should follow certain rules. These are:

• Payments can be made by check or cash in dollars for the benefit of spouse.
• Payments made, should be in concurrence with the terms and conditions mentioned in the marital agreement settlement, separation agreement, divorce judgment or the court order. Even temporary alimony provisions are eligible for tax deductions by the IRA.
• The tax filings should include statements explaining payments that are deductible by payer and payable by recipient. There are people who do not bother to mark them as deductible and face harsh tax consequences.
• Divorce couple should stay separate since alimony payments begin only after physical separation.
• Death and remarriage should be considered and alimony payments terminated.
• Avoid front loading of alimony payments since they would be recaptured or taxed to payer in the third year of separation.