When a divorced person is in a relationship with another, they may be asked to pay alimony to their ex-spouse. This monetary support may either be rehabilitative or compensatory in nature. Alimony is not paid forever and can be terminated in some cases.
Rehabilitative alimony
Rehabilitative alimony is an award that is intended to help a spouse become self-supporting. This type of alimony can be awarded to stay at home parents or to those who have less income. The purpose is to allow the dependent spouse time to recover and gain the skills needed to make a successful career.
Unlike permanent alimony, rehabilitative alimony is designed to provide a finite amount of money, which may be paid for a certain period of time. In most states, the receiving spouse is required to meet specific conditions, such as education or job experience.
During the duration of rehabilitative alimony, the supporting spouse is expected to work to become financially independent. Depending on the situation, the supporting spouse can request that the rehabilitative alimony be terminated if he or she obtains full-time employment or finds another way to earn money.
There are several reasons why a court may award rehabilitative alimony. One of the main reasons is if the recipient spouse has a chronic illness or other condition that prevents him or her from becoming employed.
Reimbursement alimony
Reimbursement alimony is a special form of spousal support. It provides compensation to the dependent spouse for the time and effort invested in supporting the other spouse’s career. The amount of reimbursement may vary depending on the circumstances.
Generally, reimbursement alimony is awarded when the court finds that the supported spouse needs compensation to offset the financial sacrifices made during the marriage. In addition, the payor must show that he or she has been treated unfairly.
Reimbursement alimony can be paid in a lump sum, or over a period of time. Generally, the length of time for which reimbursement alimony is to be paid is equivalent to the length of time the dependent spouse received support.
Reimbursement alimony is typically granted in situations where one spouse has supported the other spouse’s education or career. However, it is not often used.
A typical example would be a husband who pays for his wife’s education while she works full time. This may be considered a manipulative financial advantage.
Termination if recipient cohabits with another person
There is no such thing as a free lunch, but you may have to cohabit with your ex-spouse to get your ex to move on. Cohabitation is often the result of an unrewarding divorce or custody battle. The novelty of the situation can be hard to bear, especially if the recipient is the family breadwinner. In the worst case scenario, the spouse will find himself or herself stranded with the children. Fortunately, there are a few options available for the unemployed spouse. These include relocating to a new location or finding a new job. Luckily, a new job usually comes with perks, such as a pension or health insurance package. Depending on the employer, the benefactor might be lucky enough to be offered a raise or bonus. Alternatively, the spouse might just opt for a less enticing position.
One of the more challenging parts of the shuffle is figuring out which of the two aforementioned options is the best fit for the household. A slew of factors come into play, notably the budget and the recipient’s ability to handle the transition.
Tax treatment of alimony payments
Alimony payments in the USA are tax-deductible, but there are a few rules you should know. Alimony is defined as an ongoing obligation that is based on a legal separation agreement. A divorce agreement must specify that alimony will end when the recipient dies or the paying spouse remarries.
Alimony is not deductible if the payor lives with the recipient. However, alimony can be deducted if the payments are made to a spouse who has moved out. This is known as front-loading.
In order to deduct alimony, a payer needs to provide the recipient’s social security number. The IRS will then consider alimony for tax law purposes.
In order to deduct alimony, the payer must complete an IRS Form 1040. This form asks for the date of the divorce agreement, the payee’s social security number, and the amount of alimony.
Alimony is not considered community property. This means that only one person is responsible for paying taxes on the shared income.
