In a litigated divorce, one of the first orders of business is for the attorneys and clients to decide on “temporary orders.” They even have mediation sometimes just to decide how the parties will manage their financial and child issues during the pending divorce. This often grants one party exclusive use of the marital residence. If one spouse earns much more money than the other, usually, temporary maintenance is awarded in order to keep the household going until the divorce is final.
The IRS says that these temporary support payments are deductible so long as there is a court order requiring him to make payments for support of the other spouse. I assume here that this would only be relevant if the parties were divorced by year-end and he could file as single or head-of-household.
Click to hear more guidance from Patricia about head of household benefits.
Texas passed a law granting spousal support (also called maintenance) in 1995. The guidelines were recently changed through legislation effective 9/1/11. Guidelines provide up to $5,000 per month or 20% of the wage-earner’s monthly gross income for a period of time dependent upon the number of years married.
These guidelines apply if you will not have sufficient property after the divorce for minimal living needs. If you are able to work, you may not qualify. Being caretaker of a disabled child can result in extending these guidelines.
If the wife cohabitates, this is reason to terminate support. The support payments can be included as a deduction on the husband’s tax return, making them taxable to the wife.
One is also eligible for maintenance if your spouse was convicted (or received deferred adjudication) of a “family violence offense” within two years of the divorce.
While few women qualify for the limited parameters of spousal support under Texas statute, alimony or spousal support, is alive and well in Texas, since the couple can create an agreement to allow payments.
I see this all the time with affluent couples where one is the stay-at-home mom. This is agreed upon in the negotiations. Sometimes there is even an offset allowed for the alimony payments allowing the husband to receive more assets to compensate for paying alimony.
Basics in Texas:
- The payer receives a tax deduction.
- The recipient is taxed on the alimony or spousal maintenance payments
- If one receives alimony, they may have to make estimated tax payments.
- Payments are not deductible if still living in same house.
- Tax savings result when the payer is in a higher tax bracket than the recipient.
- Income shifting is possible while saving money on taxes.
- Payments consisting of property, notes, or other noncash items do not qualify as alimony.
- Payments to maintain property owned by the payer spouse do not qualify.
- Payments to third parties for a spouse’s rent, mortgage, taxes or tuition can qualify as alimony.
- Payments for term or whole-life insurance on the payer’s life qualify if the recipient is the owner of the policy.
- Only the amount stipulated in the divorce agreement is deductible.