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I have a separation agreement that does not stipulate alimony. It has monthly sum to pay for shared assets (house, car) and a lump sum pay bills. What portion is alimony?

 
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4 Replies

I have a separation agreement that does not stipulate alimony. It has monthly sum to pay for shared assets (house, car) and a lump sum pay bills. What portion is alimony?

Payments Not Alimony
Not all payments under a divorce or separation instrument are alimony. Alimony doesn't include:

Child support,
Noncash property settlements, whether in a lump-sum or installments,
Payments that are your spouse's part of community property income,
Payments to keep up the payer's property,
Use of the payer's property, or
Voluntary payments (that is, payments not required by a divorce or separation instrument).
<a rel="nofollow" target="_blank" href="https://www.irs.gov/taxtopics/tc452">https://www.irs.gov/taxtopics/tc452</a>
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I have a separation agreement that does not stipulate alimony. It has monthly sum to pay for shared assets (house, car) and a lump sum pay bills. What portion is alimony?

I think its the opposite.  Court-ordered maintenance is assumed to be alimony unless the order says "these payments are not to be considered alimony."

I have a separation agreement that does not stipulate alimony. It has monthly sum to pay for shared assets (house, car) and a lump sum pay bills. What portion is alimony?

@TurboTaxVanessaIA right, see below.

Also, Alimony is not deductible for any court order that is signed after December 31, 2018. That's part of tax reform.  While your separation order may have been signed in 2018, it is not clear to me whether a final divorce, that converts the separation order to a divorce order, will count as resetting the date on the order, making the payments not alimony after the date of the final divorce.  This is also a matter that you will need to review with a professional.

"For payments required under divorce or separation instruments that is executed after Dec. 31, 2018, the new law eliminates the deduction for alimony payments. Recipients of affected alimony payments will no longer have to include them in taxable income.

This TCJA treatment of alimony payments will apply to payments that are required under divorce or separation instruments that are: (1) executed after Dec. 31, 2018 or (2) modified after that date if the modification specifically states that the TCJA treatment of alimony payments (not deductible by the payer and not taxable income for the recipient) now applies."

What I think this means is, that if you have an order signed in 2018, converting to a divorce in 2019 will count as a modification.  You have the option of saying "the TCJA does not apply and these payments are still considered deductible alimony". If the order does not say that, then the alimony becomes non-deductible and non-taxable as of the date of the conversion to a final divorce.

This could be a matter for negotiations, you might consider agreeing that the payments are not deductible alimony in return for a reduction in the payment.  This would simplify both you and your ex's tax position.

As I said before, you should probably consult a professional.

I have a separation agreement that does not stipulate alimony. It has monthly sum to pay for shared assets (house, car) and a lump sum pay bills. What portion is alimony?

IRS publication 504 explains the rules for alimony including payments for shared assets.  This gets complicated, and you may want to have your situation reviewed by a professional.  If you report alimony payments and your spouse does not agree with the amount and report a matching amount of income, you both may get audited.  So you want to be on the same page, ideally.

Division of marital assets or property is not alimony and is not taxable or deductible.

https://www.irs.gov/forms-pubs/about-publication-504

The one situation directly addressed in publication 504 is the home.  If you and your spouse co-own the home, and you don't live there, and you are ordered to pay half the mortgage, then that is just you paying for your own asset, it is not alimony.  But, you can then deduct half the interest and half the property taxes on your schedule A.  If you are ordered to pay the entire mortgage, and you don't live there, then half the payment is alimony, and half is you paying for your own asset.  Your ex gets to deduct half the mortgage interest and property taxes (because it is considered "paid" from the half of the payment that is alimony that is taxable to her) and you deduct half the interest and taxes.

If you are ordered to pay car payments for a car that your ex owns, that is probably alimony.  If you are ordered to pay off a car you own so it can be transferred to your ex as part of a division of property, that is probably not alimony. Money you are ordered to pay her that she uses for bills is possibly alimony.  

When the order is not clear about what is division of property and what is spousal maintenance, you probably should get it reviewed by a tax professional in your area.

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