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What you should do about alimony and it's impact on your taxes

In many marriages, one of the spouses makes more money -- or has more wealth -- than the other spouse. This is great for the couple during their marriage. But when a divorce springs up, this disparity in wealth can cause some issues to arise, particularly when it comes to property division, debt allocation and alimony.

Alimony is also called "spousal support," and it refers to one person financially compensating their ex-husband or ex-wife as a result of a divorce. A "need" has to be established on the part of the person that receives the payments, and it has to be established that the paying spouse has the financial ability to accommodate this need. Depending on the case, these payments could be made temporarily or in perpetuity.

When alimony is involved in a divorce, the splitting spouses need to be prepared to perform some recordkeeping. Maintaining accurate records of how the payment was processed and handled is important for both spouse.

For the paying spouse, you should get a checkbook that makes carbon copies of the check you write. If you don't have that, keep a record of the check number, the amount of money you paid, what address you sent it to and when you sent it.

For the receiving spouse, you should maintain records that keep this information too. You'll also want to write down which bank and what account number the check is drawing from.

For both spouses: be prepared for the tax implications of paying or receiving taxes. The payer can deduct the alimony from his or her taxes, while the receiver must include it in his or her taxes as part of their income.

Source: FindLaw, "Alimony Guidelines: What Records to Keep Regarding Your Alimony," Accessed Sept. 4, 2015

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