Alimony definition

What is a maintenance payment?

A maintenance payment, also known as a spouse’s or alimony payment in some parts of the United States, is a periodic amount given to a spouse or ex-spouse after a separation or divorce. Payment structures and requirements for maintenance payments are laid down in a legal decree or a court order.

The central theses

  • Child support payments are legal transfers of money from one ex-spouse to another to support the other’s lifestyle.
  • Payments are usually made in cases where one spouse earns a higher income than the other.
  • Refusal to pay or failure to comply with maintenance payments may result in civil or criminal charges against the payer.
  • The Tax Reduction and Employment Act removed the tax deduction for alimony payments for divorce settlements entered into after January 1, 2019.

How child support works

Maintenance is a legal obligation where one spouse makes regular payments to the other spouse – past or current. Payments are usually made in cases where one spouse earns a higher income than the other. The terms of the agreement depend on how long the marriage lasted.

If a married couple is legally separated or divorced, both parties can agree on maintenance terms themselves. However, if they cannot reach an agreement, a court can determine the legal obligation – or alimony – for one person to support the other financially.

Maintenance payments cannot be granted if both spouses have a similar annual income or if the marriage is relatively new. A judge – or both parties – can also set an expiration date at the beginning of the maintenance decision. After that, the payer no longer has to support his spouse financially. Maintenance can also be ended in the following situations:

  • When the receiving spouse remarries
  • When a spouse dies
  • When the couple’s child or children come of age and no longer require adult assistance
  • When the receiving spouse makes no effort to provide for themselves

Refusal to pay or failure to comply with maintenance payments may result in civil or criminal charges against the payer.

Child support does not include child support, non-cash settlements, voluntary payments, or money used to maintain the payer’s property.

Requirements for maintenance payments

According to the Internal Revenue Service (IRS), alimony payments must meet the following criteria:

  • Spouses must file separate tax returns
  • Maintenance payments must be made by cash, check, or money order
  • Payments are made to a spouse or ex-spouse under a divorce or separation instrument
  • The instrument must report payments as alimony
  • The spouses must live separately
  • There is no obligation to provide maintenance after the recipient’s spouse dies

Special considerations

The Tax Cut and Jobs Act (TCJA) issued by the Trump administration eliminated the tax deduction for alimony payments for divorce settlements entered after December 31, 2018. Under the new rules, maintenance recipients no longer owe federal tax on this support. either.

These are big changes that will affect how many divorce judgments are structured. From today’s perspective, the IRS allows alimony payments from the payer for divorce or separation agreements entered into prior to December 31, 2018 to be tax deductible. However, agreements made before 2019 that were later amended to include the waiver of alimony will be in effect subject to the new rules.

Decrees issued after January 1, 2019 are no longer tax deductible under the Law on Tax Reductions and Employment.

Instead of cash payments, which will be structured in divorce deeds from 2019, some tax advisors suggest that the higher-earning partner grant the spouse an individual retirement account (IRA) instead. This is practically a tax deduction as no tax has been paid to the account on the amounts added.

A potential problem with this, however, is that the money will usually not be paid before the 59.5. Year of life can be deducted without incurring a 10% penalty.

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