In Connecticut, judges in divorce actions may award alimony to either party. Alimony is money that is paid for the support of one spouse by the other spouse, and can be awarded for either the period that the divorce action is pending or as part of the final judgment of divorce.
Although there is a common perception that alimony is only awarded to a married woman who left the workforce to stay home and raise the couples’ children, that idea is a misperception in this modern era.
In this age, where both parties to the marriage are likely to work outside the home, the alimony law is in effect via statute to make certain that there is financial “equity,” or fairness, in divorce. Even though awards of permanent alimony (for life) are becoming far less common, the court, under certain circumstances, could order the person with more income to pay the one earning less for a fixed period of time, referred to in family court as a “term.” Alimony is also available whether the party is man or a woman.
Alimony can be ordered as a lump-sum but is typically awarded periodically, meaning a certain sum is paid weekly, bi-weekly or monthly for the term. Periodic alimony is viewed under special rules by the IRS. Typically, the payments made in a taxable year are income tax deductible by the person paying alimony. As a result, the person receiving the award must claim the payments as income and pay income tax on the award.
Regardless of how a settlement agreement or trial court’s decision describes a lump-sum payment as “alimony,” the IRS will generally treat that lump-sum payments as a property distribution resulting in no deduction for the paying spouse.
Understanding the tax implications of alimony is incredibly important when negotiating a settlement in divorce or, when necessary, preparing for a trial on the issue. As always, it is best to consult an experienced family law attorney to determine whether you have a claim or potential exposure for an alimony award and to avoid any potential negative implications of an alimony award during tax time.
-Katharine Gillespie, Esq.
Disclaimer: While this blog provides general information, it does not constitute legal advice. The best way to get guidance on your specific legal issue is to contact a lawyer. To schedule a meeting with an attorney, please call one of our lawyers at (860) 316-2741. The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship.