Taxpayer asks:
I PAY MY XWIFE SUPPORT CAN I CLAIM THAT MONEY ON MY TAXES?
Taxgirl says:
This is another one of those questions for which I have received a bunch of variations on a theme. It’s not just high profile divorcees like Britney Spears and Kevin Federline, pictured above, who have to deal with these financial issues. In any divorce, no matter how big or small the financial stakes, the same rules apply.
Generally, alimony is deductible to the payor as an “above the line” deduction which means that the taxpayer doesn’t have to itemize in order to claim it (from a tax policy standpoint, this is a pet peeve of mine but that’s a separate post). Alimony which is received by a taxpayer must be reported on a tax return as income.
The specific rules regarding alimony and divorce can be complicated; the information in this article only applies to alimony under divorce or separate maintenance agreements made after 1984.
In order to deduct alimony payments under a divorce or separation decree or agreement, the following requirements must be met:
1. You and your spouse or former spouse do not file a joint return with each other;
2. Alimony payments must be paid in cash, checks or money orders (in other words, noncash property settlements for cars, etc., are not considered alimony);
3. The payment must be considered alimony – the divorce decree or other agreement cannot state that the payment is for something other than alimony;
4. You and your former spouse cannot be members of the same household when you make the payment;
5. You have no liability to make any payment (in cash or property) after the death of your spouse or former spouse; and
6. Your payment is not treated as child support.
The last part is important because child support payments are never deductible. Additionally, child support which is received is never reportable as income.
If you do not make all of your payments for alimony and child support under your divorce decree or agreement or other judgment, the IRS will consider the amount paid first as child support, not alimony. In other words, if you are required to pay $1000 in child support and $500 in alimony and you pay $1000, you may not claim any deduction at all: child support is not deductible and the IRS considers your $1000 as child support payments. If you pay $1200, you may claim $200: child support is not deductible and the IRS considers your payment applied first as child support and the remainder as alimony.
Voluntary payments, meaning those not required by law, decree, settlement agreement or otherwise, do not qualify as alimony. This is an extremely important concept to understand. This means that payments made to a spouse simply to avoid the hassle of a divorce – or in contemplation of divorce by not required – would not be deductible.
Keeping those things in mind, this is why it’s important to have a writing of some kind that clearly delineates the division between alimony and child support. Don’t assume that since it all goes to the same pot, it has the same tax consequences. And don’t assume that it doesn’t need to be memorialized in a writing somewhere, it does in order to avoid confusion later.
For more information about divorce and taxes, check out my prior post on the subject.
Also remember that family law varies state by state, which may affect your federal tax status. I highly recommend consulting with a family law attorney and/or tax professional before making any financial or tax decisions relating to child support, alimony or other support.
(NOTE: Post-TCJA, the rules regarding alimony have changed. Please see this article for more details.)
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
great information – the distinction between alimony and child support is interesting. Why are they treated differently?
Dear Tax Girl:
I’ve been told that I may be eligible for a SPASTIC (Sustained Pain And Suffering Tax Income Credit) deduction, but I can’t find reference to it in the tax code, and every time I call the IRS my calls keep getting dropped.
A reliable source told me that SPASTIC allows non-divorced taxpayers to deduct the money they would have had to pay in child support and alimony if they hadn’t toughed it out for one more miserable year. My reliable source told me that there’s an extra credit if one spouse has endured blogging-related abandonment.
Have you or your readers heard of this? Why is the IRS not publicizing this?