Alimony is payment to or for a spouse or former spouse under a divorce or separation agreement.
To qualify as alimony, the payments must be "periodic payments" which are either payments made in a fixed amount for an indefinite period, or payments made in an indefinite amount for a fixed period. There are occasions when alimony may be paid in a one time lump sum payment.
Since alimony is deductible from gross income by the payer it is included in gross income by the collecting spouse or former spouse. Alimony received is included in federal gross income and therefore must be included in Massachusetts gross income.
A deduction is allowed for total amount paid to a former spouse during the taxable year for alimony or separate maintenance under a court decree.
Child Support Payments do not qualify as an alimony deduction; amounts are not deductible by the payer and are not included in gross income by the recipient.
Both New Hampshire and Massachusetts follow the alimony recapture provisions as of the 1/1/98 Internal Revenue Code. The federal rules force a "recapture" of front-loaded alimony payments in year
three of a divorce alimony agreement. These rules are designed to prevent property settlement payments from qualifying for alimony treatment.
Deductible payments made in the first or second year may be recaptured (reported as income by the payer) in the third year where payments within the first three years decline by more than $15,000.
You should always consult with a tax professional about your particular situation to see how the payments would be treated by the Internal Revenue Service.
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