Is my lump sum alimony payment tax deductible?

Question: I paid $100,000 of alimony in a lump sum in 2006. The IRS is now claiming that it is not deductible. Can you provide direction?

 

Answer: You need to refer to your original divorce decree.  The divorce decree or marital settlement agreement should detail how the lump say payment was to be paid and the tax implications of the payment on both parties.

Maintenance payments are generally tax deductible to the payer and taxable to the payee.  If your divorce decree called for a maintenance buyout, however, the payment is likely not tax deductible to you or taxable to your ex-wife.  This is because maintenance buyouts are typically a reduced payment amount which takes into consideration the present day value of maintenance payments over time including the tax consequences to both parties.

You should schedule an appointment with a domestic litigation attorney who can review the Order and provide you with guidance.  Though I do not practice in Florida, however, Cordell & Cordell has attorneys licensed and located in Florida who would be happy to review the Order.

 

Erica Christian is an Associate Attorney in the Milwaukee, Wisconsin, office of Cordell & Cordell, P.C. She is licensed to practice law in the state of Wisconsin. She is a member of the Wisconsin Bar Association, the Family Law Section and the Children’s Law Section.

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