Tax Planning and Alimony Payments in a New Hampshire Divorce

New Hampshire allows alimony payments in a lump sum, periodic payments, or both. New Hampshire Statutes 458:19 But, there is nothing to prevent the parties from inserting an amount in a Marital Settlement Agreement that is intended to substitute for alimony or support and then having both parties waive their future right to alimony or support. In this case, the "settlement" amount may not be taxable to the receiver.

Alimony is taxed by the recipient in the year it is received. If taxes are not withheld, it is possible you will be required to pay taxes when filing quarterly returns. For those who pay alimony under a divorce agreement, the payments may be deductible if certain requirements are met. Note that any payments made, which are not required by agreement or decree, are not deductible as alimony payments. You should always consult with a tax accountant before agreeing to a settlement amount in your Marital Separation Agreement to ensure the most beneficial tax treatment possible

Source: IRS Tax Tip 2008-32 and IRS PUB 504 Divorced or Separated Individuals.

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