Federal tax law allows the payor of alimony to take a deduction for those payments, and requires the recipient (or “payee”) to report those payments as income. From this simple rule flows an opportunity to create “free money” between the parties, assuming they are in different tax brackets. When the payor is in a higher tax bracket than the payee, the IRS ends up subsidizing part of the alimony payment. In the article, Los Angeles divorce attorney Christopher C. Melcher summarizes the tax laws relating to spousal support.
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