Alimony and Taxes
You may deduct the alimony or separate maintenance payments you are required to make to your spouse or former spouse, or to a third party on behalf of that spouse. This is because your spouse or former spouse will pay the tax on this income. One benefit of having the recipient pay the taxes is that the recipient's tax rate is likely lower than the tax rate of the person paying alimony. This topic covers alimony under divorce or separate maintenance decrees or written separation agreements entered into by you and your spouse or former spouse after 1984. It explains what is deductible if you pay alimony, and what is taxable if you receive alimony.
Requirements for Deducting Alimony
Alimony payments you make under a divorce or separation instrument, such as a divorce decree or a written agreement incident thereto, are deductible if all of the following requirements are met:
- 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 divorce or separation instrument does not say that 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 any payment (in cash or property) after the death of your spouse or former spouse; and
- Your payment is not treated as child support.
Can I Deduct Child Support?
Child support is never deductible. If your divorce decree or other written instrument or agreement calls for alimony and child support, and you pay less than the total required, the payments apply first to child support. Any remaining amount is then considered alimony.
Are Cash or Property Divorce Settlements Considered Alimony?
Property settlements, whether in a lump sum or installments, even though required by the divorce decree or other written instrument or agreement, do not qualify as alimony. Any payments not required by such a decree or agreement do not qualify as alimony. You do not have to itemize deductions to claim your alimony payments. You may claim the deduction on line 34a of Form 1040. You must provide the social security number of the spouse or former spouse receiving the payments. If you don't, you may have to pay a $50 penalty and your deduction may be disallowed.
How Do I Report Alimony on my Federal Taxes?
If you are the spouse or former spouse who is receiving the alimony, you must report the full amount as income on line 11 of Form 1040. 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.
If you would like to know more about how alimony affects your tax return, whether you pay or receive alimony, there are many tax attorneys in your area who may be able to help.