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No alimony deduction for life insurance premiums

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. I’m paying life insurance on a policy I own with my ex-wife as beneficiary. Are the premiums deductible as alimony? G.S., Framingham, Mass.

A. No. The premiums may be deducted only if you transfer ownership rights to the policy and your ex-wife’s interest is absolute. For example, if you transfer ownership but your ex-wife must remain single in order to collect benefits, no deduction is allowed. Similarly, if your ex-wife is a contingent beneficiary (e.g., your children are the primary beneficiaries), you can’t deduct the premium payments as alimony.

Tip: Have a tax pro take all tax factors into account when structuring payments under a divorce decree.

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