Tax Topic 452 – Alimony Paid
Tax Topic 452 – Alimony Paid
Amounts paid under divorce or separate maintenance decrees or written separation agreements entered into between you and your spouse or former spouse are considered alimony for federal tax purposes if:
- You and your spouse or former spouse do not file a joint return with each other
- You pay in cash (including checks or money orders)
- The payment is received by (or on behalf of) your spouse or former spouse
- The divorce or separate maintenance decree or written separation agreement does not say the payment is not alimony
- If legally separated under a decree of divorce or separate maintenance, you and your former spouse are not members of the same household when you make the payment
- You have no liability to make the payment (in cash or property) after the death of your spouse or former spouse, and
- Your payment is not treated as child support or a property settlement
Not all payments under a divorce or separation instrument are alimony. Alimony does not include:
- Child support
- Noncash property settlements
- Payments that are your spouse’s part of community property income
- Payments to keep up the payer’s property, or
- Use of the payer’s property
- Voluntary payments
You may deduct from income the amount of alimony or separate maintenance you paid, and you must include in income the amount of alimony or separate maintenance you received.
Child support is never deductible. If your decree of divorce or separate maintenance provides for alimony and child support, and you pay less than the total required, the payments apply first to child support. Any remaining amount is considered alimony.
Noncash property settlements, whether in a lump sum or installments, do not qualify as alimony. Voluntary payments (that is, payments not required by a divorce decree or separation instrument) do not qualify as alimony.
You do not have to itemize deductions to deduct your alimony payments. You must claim the deduction on Form 1040 (PDF), U.S. Individual Income Tax Return. You cannot use Form 1040A (PDF), U.S. Individual Income Tax Return, Form 1040EZ (PDF), Income Tax Return for Single and Joint Filers With No Dependents, or Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. You must provide the Social Security number of the spouse or former spouse receiving the payments. If you do not, you may have to pay a $50 penalty and your deduction may be disallowed.
If you are the spouse or former spouse who is receiving the alimony, you must report the full amount as income on your Form 1040(PDF) or on Schedule NEC in Form 1040NR (PDF). You cannot use Form 1040A (PDF), Form 1040EZ (PDF), or Form 1040NR-EZ(PDF), U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents. If you do not give your Social Security number to your spouse or former spouse who is making the alimony payments, you may have to pay a $50 penalty.
For more information on the general requirements for alimony and for information on other decrees and agreements under which amounts paid and received may be treated as alimony, see Publication 504, Divorced or Separated Individuals. For more information on decrees and agreements executed before 1985, see the 2004 version of Publication 504 (PDF).
Child Support Versus Alimony
If you agree to pay “alimony” to your ex, you are certainly counting on being able to write off those payments. Indeed, properly structured payments are deductible on your return (good for you) and are taxable income on your ex’s 1040 (bad for your ex). In certain cases, predivorce payments can also qualify as deductible alimony.
In contrast, payments that are deemed to be for child support are a nondeductible expense for you and are tax-free income for your ex. Ditto for any payments that are deemed to be part of the divorce property settlement.
If you are the person making the payments, you naturally want everything to be deductible alimony. You may think all that’s needed is for the divorce papers to say your payments are, in fact, alimony. Sorry. It’s not anywhere near that simple.
In fact, the federal tax laws set up a gauntlet of complicated requirements, and you must get through all of them. Otherwise, your outlays are nondeductible child support or property settlement payments, no matter what they are called in the divorce papers.
IRS Publication 504 (Divorced or Separated Individuals) probably has the most understandable explanation of all the various rules that must be met to ensure deductible alimony. You can download a copy at the IRS web site. Here’s a summary of the most important points.
A common problem is failing to specify that “alimony” payments will cease if your ex dies. If the payments would continue, they are not deductible alimony — regardless of what you intended, how the payments are described in your divorce documents or the fact that your ex turns out to live long enough to collect 100% of the payments. Don’t be confused by the fact that alimony payment generally will continue after your death. They become a legal obligation of your estate. That’s OK with the IRS and won’t affect deductibility.
Another common error is setting up an “alimony” payment schedule that calls for reduced payouts when your children reach a certain age, finish their schooling, get married, become self-supporting, etc. These events are called “contingencies related to a child” in tax lingo. The child contingency rules are extremely complicated. What you need to know is that they can cause some or all of your intended deductible “alimony” to become nondeductible child support.
Finally, if you set up an alimony payment schedule in which the payments drop substantially after the first year or two, you may have a problem with “alimony recapture.” If so, you will be forced to pay income tax on the recaptured amount in the third year (your ex will get an equal deduction in that year). To find out if you’ll be affected, use our Deductible Alimony Calculator. If necessary, you can adjust the payment schedule until your recapture problem goes away.
Above all, do not rely on your divorce attorney to arrange your deductible alimony payments. Amazingly, many otherwise competent divorce lawyers are woefully ignorant on this subject. So unless your lawyer is also a tax guru (highly unlikely), you should hire a CPA or tax attorney to check out the proposed settlement. If necessary, he or she can suggest changes in the wording to make sure you get your rightful deductions.