Closed Thread
Results 1 to 10 of 10
  1. #1
    Harmonygrl is offline Member
    Join Date
    Aug 2007
    Location
    Louisville KY
    Posts
    62

    Is alimony interest tax deductible?

    What is the name of your state (only U.S. law)? Kentucky

    Is the payment of interest on alimony (as in court ordered interest for an overdue alimony payment) deductible in the same way as the original alimony amount is deductible to the payer on income taxes?

    Or is it only the original amount of alimony that is deductible to the payer?

    Thanks!
  2. #2
    stealth2 is offline Senior Member
    Join Date
    May 2002
    Posts
    43,840
    There wouldn't be any interest if the payor paid on time. So no, s/he doesn't get to deduct it.
  3. #3
    LdiJ is offline Senior Member
    Join Date
    May 2004
    Posts
    64,290
    Quote Originally Posted by Harmonygrl View Post
    What is the name of your state (only U.S. law)? Kentucky

    Is the payment of interest on alimony (as in court ordered interest for an overdue alimony payment) deductible in the same way as the original alimony amount is deductible to the payer on income taxes?

    Or is it only the original amount of alimony that is deductible to the payer?

    Thanks!
    If someone is in that situation, they should consult with a tax attorney. There has been some major debate on that issue recently.
  4. #4
    mistoffolees is offline Senior Member
    Join Date
    Mar 2008
    Posts
    21,315
    Quote Originally Posted by LdiJ View Post
    If someone is in that situation, they should consult with a tax attorney. There has been some major debate on that issue recently.
    Nice of you to bring that up.

    Just to refresh everyone's memory:

    - You stated that the interest was deductible.
    - I stated that it was not
    - You said everyone in your office was laughing their heads off at me
    - At least one (and probably several - I don't remember now) provided links that showed conclusively that I was right and you were wrong
    - CC asked you when you were going to apologize
    - You never did

    So now, when the same question comes up, instead of admitting that you were wrong, you duck and hide. Nice going.
  5. #5
    Harmonygrl is offline Member
    Join Date
    Aug 2007
    Location
    Louisville KY
    Posts
    62

    Thanks for the quick responses!

    I appreciate the information - trying to get a jump on taxes this year, instead of waiting until April

    And sorry about the big title (didn't want to seem like I was cyber-yelling lol) -- I didn't know that would happen, and now I cannot edit the title, sighs...
  6. #6
    Proserpina is offline Senior Member
    Join Date
    Mar 2009
    Location
    Watching you eat your Cheerios
    Posts
    37,978
    Quote Originally Posted by mistoffolees View Post
    Nice of you to bring that up.

    Just to refresh everyone's memory:

    - You stated that the interest was deductible.
    - I stated that it was not
    - You said everyone in your office was laughing their heads off at me
    - At least one (and probably several - I don't remember now) provided links that showed conclusively that I was right and you were wrong
    - CC asked you when you were going to apologize
    - You never did

    So now, when the same question comes up, instead of admitting that you were wrong, you duck and hide. Nice going.


    Oh.

    You mean this?

    http://community.lawyers.com/forums/t/108402.aspx
  7. #7
    ecmst12 is offline Senior Member
    Join Date
    Feb 2006
    Location
    Philadelphia, PA
    Posts
    35,269
    That was an interesting link. It seems like the tax lawyer was saying the interest is taxable BOTH to the payor and the payee...that seems like the government is double-dipping to me, does that seem right?

    Though....the interest I pay on my credit cards is not tax deductible to me, and is (I assume) taxable income to the credit card companies, so I guess it's no different then that.
  8. #8
    LdiJ is offline Senior Member
    Join Date
    May 2004
    Posts
    64,290
    Quote Originally Posted by ecmst12 View Post
    That was an interesting link. It seems like the tax lawyer was saying the interest is taxable BOTH to the payor and the payee...that seems like the government is double-dipping to me, does that seem right?

    Though....the interest I pay on my credit cards is not tax deductible to me, and is (I assume) taxable income to the credit card companies, so I guess it's no different then that.
    There is some case law on the subject that is very specific to alimony and child support, stating that interest on both alimony and child support obligations is taxable income to the recipient. Therefore I don't have any doubts on that end. I saw and read that case law. Particularly the interest on child support is a HUGE issue. However, its not an issue for our practice, because our state does not add interest to child support arrearages.

    I have not found any tax case law specific to its deductibility to the obligor. (alimony, not child support because child support is definitely not deductible in any way) I have a great deal of trust in the tax attorney whose thread Prosperpina posted, but his case law wasn't as specific to the matter at hand as I would have liked.

    As a tax professional, if I had a client in that circumstance I would have to do more research myself before making a decision on that issue. In fact, our office specifically decided not to spend the research time on the issue because alimony is not terribly common in our state and the powers that be felt that the issue would be better researched if and when a client needed it researched.

    However...as an example, a person pays tax on the money that they use to pay credit card interest, and the credit card company also pays tax on the net profits that they earn from that same interest money. So its not uncommon to pay tax on interest twice, or on any money that is spent for any purpose for that matter. If you think about it, tax is paid on the same money sometimes dozens of times.

    I suggested a consult with a tax attorney because I believe that the issue is important enough, particularly if the amount of interest is high, that someone needs someone who is obligated to fully research the situation for them and to make a determination based on full research.

    However, if the amount was low, and not worth the cost of the research, I likely would take the more conservative approach and not deduct it.
  9. #9
    mistoffolees is offline Senior Member
    Join Date
    Mar 2008
    Posts
    21,315
    Quote Originally Posted by Proserpina View Post
    Exactly. The one that says:
    "I think the non-tax pro [mistoffolees] has it right, and the tax pros [Ldij and her cohorts] in this case have it wrong,"

    It is detailed in this thread:
    [url]http://forum.freeadvice.com/alimony-spousal-support-35/alimony-interest-treated-alimony-534849.html[/url]

    You know, the one where you were completely wrong about terminology ("personal interest") that the IRS had been using for AT LEAST 5 years - and you claimed that it wasn't a real term. (funny thing for someone who claims to be a tax professional).

    The one where I showed you the IRS rules that say that personal interest is not deductible.

    And, most importantly, the one where you asked a tax attorney on another forum (a tax attorney that you said was almost always right) and they told you that you were wrong.

    The tax attorney (along with IRS rules) make it clear that alimony interest is personal interest - and therefore taxable to the recipient. Like other personal interest, it is not deductible to the payor (unless the payor is a business, in which case SOME interest is deductible as a normal business expense, but since businesses generally don't pay alimony, that's irrelevant)


    YOUR OWN TAX ATTORNEY said that you were wrong. Yet you still insist on playing your silly games.

    Still waiting for that apology.
    Last edited by mistoffolees; 01-22-2011 at 08:15 AM.
  10. #10
    mistoffolees is offline Senior Member
    Join Date
    Mar 2008
    Posts
    21,315
    Quote Originally Posted by LdiJ View Post
    There is some case law on the subject that is very specific to alimony and child support, stating that interest on both alimony and child support obligations is taxable income to the recipient. Therefore I don't have any doubts on that end. I saw and read that case law. Particularly the interest on child support is a HUGE issue. However, its not an issue for our practice, because our state does not add interest to child support arrearages.

    I have not found any tax case law specific to its deductibility to the obligor. (alimony, not child support because child support is definitely not deductible in any way) I have a great deal of trust in the tax attorney whose thread Prosperpina posted, but his case law wasn't as specific to the matter at hand as I would have liked.

    As a tax professional, if I had a client in that circumstance I would have to do more research myself before making a decision on that issue. In fact, our office specifically decided not to spend the research time on the issue because alimony is not terribly common in our state and the powers that be felt that the issue would be better researched if and when a client needed it researched.

    However...as an example, a person pays tax on the money that they use to pay credit card interest, and the credit card company also pays tax on the net profits that they earn from that same interest money. So its not uncommon to pay tax on interest twice, or on any money that is spent for any purpose for that matter. If you think about it, tax is paid on the same money sometimes dozens of times.

    I suggested a consult with a tax attorney because I believe that the issue is important enough, particularly if the amount of interest is high, that someone needs someone who is obligated to fully research the situation for them and to make a determination based on full research.

    However, if the amount was low, and not worth the cost of the research, I likely would take the more conservative approach and not deduct it.
    And, yet, even after the tax attorney told you that you were wrong, you kept insisting that you were right. Bottom line is that the recipient has to pay tax on alimony interest and the payer can not deduct it. It is personal interest (something that you denied even existed until several people pointed it out to you).

    Even now, you still refuse to admit that you were wrong. Look at the first post in the thread. Instead of answering the question with the clear answer - that alimony interest is taxable to the recipient and is classified as personal interest which is not deductible, you claimed it was unclear..... simply to avoid admitting that you were wrong and owe an apology.

Similar Threads

  1. Replies: 5
    Last Post: 10-01-2008, 12:26 PM
  2. 2nd mortgage interest deductible?
    By joepar2567 in forum Tax Law
    Replies: 1
    Last Post: 08-14-2005, 09:31 AM
  3. Deductible personal interest?
    By hooperwv in forum Tax Law
    Replies: 1
    Last Post: 08-19-2002, 05:25 PM
  4. Replies: 1
    Last Post: 04-24-2001, 11:07 AM
  5. Replies: 1
    Last Post: 12-27-2000, 12:32 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  

© 1995-2012 Advice Company, All Rights Reserved

FreeAdvice® has been providing millions of consumers with outstanding advice, free, since 1995. While not a substitute for personal advice from a licensed professional, it is available AS IS, subject to our Disclaimer and Terms & Conditions Of Use.