If you expect to either pay or be the recipient of some type of monetary award in a divorce proceeding, then it will be important for you to understand the divorce law in your state and how courts award alimony or what is also commonly called spousal support.
In all states as well as the District of Columbia there are charts to determine how much child support should be paid, and the formulas are fairly well defined. However, spousal support is not always so clear cut and in many states the awarding of and the amount of spousal support will largely be up to the discretion of the judge. For this reason, it is always best for the parties to the divorce to come to some agreement prior to a final divorce decree being issued.
Some states do have charts to help determine how much spousal support should be awarded. In Texas, there is a maximum award allowed of $2,500 per month for a maximum of three years. In California no such guideline exists, but there are guidelines which were developed in Santa Clara, CA and many California counties now use those charts.
So, when alimony is on the table in a divorce proceeding, what are the factors the court will look to for deciding whether, how much and how long an award of alimony should be?
Essentially, the primary factors will include:
· The financial needs of the receiving spouse
· The ability to pay of the paying spouse
· The disparity in income between the spouses
· Standard of living during the marriage
· Financial and non-financial contributions of each spouse to the marriage
· Age and health of both spouses
· Marital conduct (or misconduct), such as extramarital affairs, abuse, etc.
· Length of the marriage
· Whether or not children are involved, and who has custody
· Job skills of the receiving spouse
· How much property each spouse is getting in the divorce
Some types of payments qualify as “alimony” and others may not. It is important to understand the distinction because alimony is recognized under tax law. Therefore, alimony is a deductible tax expense by the one who pays it and taxable to the one who receives it. This is different than child support.
There are eight criteria for alimony to be considered tax deductible by the payor and taxable to the payee are:
1. Payments must be included by the judge as part of the written divorce or separation decree.
2. The payor and payee may not live in the same household.
3. All payments must be in cash or cash equivalents such as check or money order.
4. All payments must be made directly to the ex spouse or spouse if separated.
5. There can be no language in the decree stating that the payments are other than alimony.
6. No joint tax return can be filed between the parties paying and receiving alimony.
7. Payments cannot extend beyond the life of the spouse.
8. None of the payments can be stipulated as child support or considered child support under applicable tax code.
It is important that your attorney carefully review any language in the divorce decree before it becomes final to ensure that there is nothing in the document which would violate these eight guidelines and thereby exclude payments as a deductible expense for the payor.
Divorce law varies by state and for explicit information on how alimony might be viewed by the courts in your situation you should consult a knowledgeable divorce attorney licensed in your state.