I live in Illinois, I understand Child Support is not a tax break, or have any tax implications, but how about lawyer fees everytime she takes me back to court.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Hi Taxgirl,
My wife filed for divorce in Tennessee Aug 2007. Moved out of the house in Dec 2007 and have paid her money ordered by the court as spousal support.
I’ve paid all year and want to know if I can claim this money paid as alimony.
Thanks for your help!
Taxgirl says:
It sounds as though you can because of four important words “ordered by the court.”
To qualify as alimony for purposes of a federal income tax deduction, the payments must be “to or for a spouse or former spouse under a divorce or separation instrument.” That means that you must have an official agreement requiring the payment of support. An official decree of divorce with mandatory support payments, a written separation agreement requiring such payments or any other type of court order requiring you to support your spouse would count. The agreement or order does not have to be permanent: temporary decrees, interlocutory (not final) decrees, decrees of alimony pendente lite (awaiting a final decree “during the proceedings”) all count.
(Psst, try those terms out at cocktail parties and see how cool you feel.)
You also have to be divorced or under a separation order. Yeah, it sounds like common sense but you’d be surprised. Additionally, you cannot be living under the same roof as your spouse/ex spouse when you make the payments (unless you meet an exception due to a court order), nor can you claim alimony in a year that you file a joint tax return with your spouse/ex spouse.
Payments must be made in cash or cash equivalent. Noncash property settlements (including turning over the family home) do not qualify as alimony, even if ordered by the court.
Voluntary payments that are not made under a divorce or separation instrument do not qualify as alimony. And the IRS and you may have a different understanding as to what constitutes “voluntary.” Here’s a tip: if you have an official order or agreement, as mentioned above, it’s not voluntary. But if you simply have an understanding, you feel morally compelled to make payments or your ex-spouse is demanding that you pay him or her something and you do so just to shut him or her up (it happens), you may not deduct those payments as alimony.
Also note that payments which can be characterized as child support do not count as alimony payments. If you are overdue on child support, the IRS will characterize payments made to your spouse/ex spouse as child support first, not alimony, and it is therefore not deductible. So stay current on these things! It’s not on tax advantageous, it’s the right thing to do.
Your bonus tip for the day: make sure that your family lawyer knows something about tax law. If not, hire a tax professional to review your settlement or divorce agreement and make sure it makes good tax sense (no matter which side you’re on). While you cannot deduct fees and costs to get a divorce, you may be able to deduct legal fees paid for tax advice in connection with a divorce and legal fees to get alimony. You may also be able to deduct the related costs of appraisers, actuaries, and accountants.
Take it from my friends, Nazareth: love hurts. Talking about taxes shouldn’t.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
I have an online website sponsored through a company where I sell items and make a percentage off each sale. I am in the process of trying to get a trademark for the mark I use on the items that I sell. Unfortunately, there is someone else trying to get a similar trademark at the same time so my costs for getting the trademark (basically paying the attorney and the fees) are much more than I thought it would be. I have made over $600 from the site and my question is – are the costs for the trademark deductible? Do I need to form a small business in order to do this?
Taxgirl says:
Congrats on moving forward with your business! I know exactly what you’re talking about – I trademarked my mark, too.
You can absolutely deduct reasonable legal fees related to your business – and that includes your trademark. Even if you don’t eventually secure the trademark, the work may be deductible.
And no, you do not need to be incorporated in order to take the deduction.
You do need to be aware, however, that this is an area where the hobby/loss rules may apply. If you’re not sure whether you are operating as a business (even if you are not incorporated) or as a hobby, make sure you check out my prior post on hobby/loss rules.
(Note: Please read the comments below for additional important considerations!)
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
