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Keeping track of your alimony payments may pay off long term

Going through divorce can understandably be tough from an emotional standpoint, but it can also be difficult financially. This is particularly true if either you or your soon-to-be ex-spouse will pay alimony.

Determining who should pay alimony following divorce and how much is just part of the equation. The other part is keeping track of your alimony records after the finalizing of your divorce. Here is a look at how courts handle alimony, or spousal maintenance, in New Jersey and what records you should keep.

What exactly is alimony?

Alimony refers to the payments that one spouse makes to the other spouse in order to provide financial support post-divorce. Alimony does not necessarily have to be paid during divorce, as the judge will decide if either you or the other party will pay alimony based on your specific situation.

These days, many judges are moving away from orders for alimony payments. However, courts are generally still issuing alimony judgments in situations where two people have been married for a long time or one party earned a lot more compared with the other one. In addition, alimony may be necessary in divorce situations where one of the parties left his or her job to take care of the children or the household.

Alimony and taxes

In a majority of situations, alimony payments are tax deductible for those making them. Meanwhile, alimony is taxable income for those receiving it. For this reason, it is critical that you maintain records of your alimony payments or your acceptance of these payments. After all, you may find that the other party will challenge the amount you are paying or accepting, or even the Internal Revenue Service may investigate how much alimony is actually being paid.

If you do not maintain the proper documentation, you might lose your tax deduction if you are the recipient spouse, or you might have to make additional payments if you are the paying spouse.

The documentation you should keep

If you are the alimony recipient, it would behoove you to keep the numbers of the checks you received and how much you received on various dates. Meanwhile, if you are the paying spouse, you may want to hold onto a list of all of the payments you made and when, as well as copies of your checks. You might also want to keep track of receipts for all alimony payments you make in cash to further protect your best interests long term.