The standard rule in Pennsylvania regarding the tax treatment of alimony payments in a divorce is that payments made by the payor are tax deductible and that payments received by the payee constitute taxable income. However, there is an important caveat to this rule. The U.S. Tax Code only permits alimony to be deductible if it is specified in a written order or property settlement agreement.
Therefore, if you are paying your former spouse money in spousal support through an informal agreement, and if you would like to deduct those payments when tax time rolls around, the IRS could ask for proof of the amount of alimony. If there is no supporting document, you will not be permitted to deduct those payments. Similarly, if you have a written document stating that you will pay $500 per month in spousal support, but have been voluntarily paying $1000 instead, the IRS will only permit you to deduct the amount memorialized in writing. Therefore, you would hypothetically lose out on deducting $6000 at the end of the year.
It is obvious then that if you are in a position where you are paying spousal support, you must have an agreement in writing to maximize your tax benefits. Likewise, if do have a written agreement and if you ever alter the amount you are paying to your former spouse, the change needs to be memorialized in writing. The attorneys at Gusty A.E. Sunseri & Associates are experienced in negotiating and crafting alimony agreements. If you are looking at the prospect of a future alimony award or already have an unwritten agreement, contact our firm today to discuss your case.