Family Issues

If Congress does not agree by the end of 2012, the estate tax is set to revert to pre-2001 levels. As of this date, estate tax rates for 2013 and beyond are set to increase to a maximum of 55% (up from 35% in 2011 and 2012), and only the first $1 million of one’s estate (down from $5.12 million in 2012 and $5 million in 2011) would be exempt.
In 2011, For an estate or gift(s) with:
Taxable income of $1 but not over $10,000 the tax is $0 plus 18 % over $0
T.I. of $100,000 but not over $150,000 the tax is $23,820 plus 30 % over $100,000
T.I. of $150,000 but not over $250,000 the tax is $38,800 plus 32 % over $150,000
T.I. of $250,000 but not over $500,000 the tax is $70,800 plus 34 % over $250,000
T.I. of $500,000 the tax is $155,800 plus 35 % over $500,000 Any gift tax that you would owe is eliminated or reduced by a tax credit. The credit against taxable gifts for 2011 and 2012 is $1,730,800 effectively exempting $5 million of taxable estates.

Alimony is a legal obligation to provide financial support to one's spouse from the other spouse after marital separation or from the ex-spouse upon divorce.
Alimony must be paid under a decree of divorce or legal separation agreement or decree of support.
Alimony cash payments are deductible if you pay them and reportable as taxable if you receive them.
Noncash property settlements is not alimony.
Divorced and legally separated parties must not live in the same household when payments are made.
Child support payments do not qualify as alimony and are not deductible to the giver and not taxable to the receiver.

Annual Federal Gift Tax Exclusion = $14,000
Lifetime Federal Gift Tax Exclusion = $5,250,000
Lifetime GST Tax Exemption = $5,250,000
Important NOTE is that State exclusions may be different from above Federal amounts.

When both alimony and child support are made together in a monthly payment, it is presumed that child support is paid first.
If your husband did not pay the full amount in a month or many months, then you need to pick up as income the difference over the child support amount for that month as alimony and income on your tax return.
It is reported on IRS Form 1040, page 1.

The deductible alimony payments made in the first year or second year may have to be recaptured as income in the third year where the alimony payments within the first 3 years decrease by more than $15,000. Payments made in the second after the separation year are recaptured if the payments exceed the payments in the third post separation year by more than $15,000. Payments made in the first after the separation year are recaptured as income if they exceed the "average" payments made in the second post separation year and the third post separation year by more than $15,000. The recaptured amount is reported on IRS Form 1040 on the line Alimony received with a notation Alimony recapture with the payee spouse’s social security number.

No. There is no minimum payment period. Recapture of alimony amounts may apply where payments decrease by more than $15,000 within the first three years of the divorce.

Generally, alimony payments are not taxable or deductible if you live in the same household as your divorced or legally separated spouse. But, if you are separated under a written agreement, but not legally separated under a decree of divorce or separate maintenance, then you may claim the deduction. Speak to a local CPA about this in greater detail.

Yes. Annulment decree payments qualify as deductible alimony payments. They also would be considered taxable income to the recipient. They should be reported as alimony (adjustment or income) on IRS Form 1040 page 1.

If you live in the same house as your ex-spouse and are legally separated or divorced, you cannot deduct your alimony payments, nor is your ex-wife required to report the alimony as income.