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Ask the taxgirl: Is it Alimony?

January 28, 2009 · 14 comments

Taxpayer asks:

Hi Taxgirl,
My wife filed for divorce in Tennessee Aug 2007. Moved out of the house in Dec 2007 and have paid her money ordered by the court as spousal support.
I’ve paid all year and want to know if I can claim this money paid as alimony.

Thanks for your help!

Taxgirl says:

It sounds as though you can because of four important words “ordered by the court.”

To qualify as alimony for purposes of a federal income tax deduction, the payments must be “to or for a spouse or former spouse under a divorce or separation instrument.” That means that you must have an official agreement requiring the payment of support. An official decree of divorce with mandatory support payments, a written separation agreement requiring such payments or any other type of court order requiring you to support your spouse would count. The agreement or order does not have to be permanent: temporary decrees, interlocutory (not final) decrees, decrees of alimony pendente lite (awaiting a final decree “during the proceedings”) all count.

(Psst, try those terms out at cocktail parties and see how cool you feel.)

You also have to be divorced or under a separation order. Yeah, it sounds like common sense but you’d be surprised. Additionally, you cannot be living under the same roof as your spouse/ex spouse when you make the payments (unless you meet an exception due to a court order), nor can you claim alimony in a year that you file a joint tax return with your spouse/ex spouse.

Payments must be made in cash or cash equivalent. Noncash property settlements (including turning over the family home) do not qualify as alimony, even if ordered by the court.

Voluntary payments that are not made under a divorce or separation instrument do not qualify as alimony. And the IRS and you may have a different understanding as to what constitutes “voluntary.” Here’s a tip: if you have an official order or agreement, as mentioned above, it’s not voluntary. But if you simply have an understanding, you feel morally compelled to make payments or your ex-spouse is demanding that you pay him or her something and you do so just to shut him or her up (it happens), you may not deduct those payments as alimony.

Also note that payments which can be characterized as child support do not count as alimony payments. If you are overdue on child support, the IRS will characterize payments made to your spouse/ex spouse as child support first, not alimony, and it is therefore not deductible. So stay current on these things! It’s not on tax advantageous, it’s the right thing to do.

Your bonus tip for the day: make sure that your family lawyer knows something about tax law. If not, hire a tax professional to review your settlement or divorce agreement and make sure it makes good tax sense (no matter which side you’re on). While you cannot deduct fees and costs to get a divorce, you may be able to deduct legal fees paid for tax advice in connection with a divorce and legal fees to get alimony. You may also be able to deduct the related costs of appraisers, actuaries, and accountants.

Take it from my friends, Nazareth: love hurts. Talking about taxes shouldn’t.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

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{ 10 comments… read them below or add one }

1 Joel Libava January 28, 2009 at 8:10 am

Hi!
Average post. Great video.
Thanx,
The Franchise King
LOL!

2 Susan Kishner January 28, 2009 at 8:14 am

Thanks for posting the article, was certainly a great read!

3 Robert D Flach January 28, 2009 at 8:15 am

Kelly-

I just finished a “battle” with the IRS regarding an alimony deduction that took several years. I finally had to get the local TAXPAYER ADVOCATE office involved – although my request to the TA was initially ignored and I had to write to Nina Olsen directly.

The problem arose because the divorce decree stated “The parties expressly waive past, present and future alimony against one another” and then went on to state “The Husband shall pay to the Wife the sum of $650.00 per month” to cover the cost of her apartment rent and insurance costs.

Poor wording by the lawyer – they parties should have “expressly waived SUPPORT PAYMENTS”. However – “if it walks like a duck and quacks like a duck . . .”

I did win in the end, and monies withheld from several year’s tax refunds were returned to the client.

When I have some free time (after tax season, of course) I may write a post about the situation for THE WANDERING TAX PRO.

BTW – your advice of having a tax pro review the document is excellent, and actually should be done in ALL cases, regardless of the “expertise” of the attorney.

TWTP

4 Brad January 28, 2009 at 10:26 am

Great article.

If the payment is called alimony by a court (or settlement agreement) but terminates upon children obtaining the age of majority or another similar condition, it may not be alimony.

5 Vinny January 28, 2009 at 10:32 am

Your writer also needs his ex’s SSN, otherwise, you can’t take the deduction. And if the ex doesn’t claim the alimony as income on her 1040, she’ll get dinged.

6 Kelly January 28, 2009 at 10:38 am

True re the Social, though I’m guessing that he has the ex’s spouse since they likely filed together in prior years. If not, there are bigger issues. ;)

As to the income component, absolutely. I decided just to focus on the reader but his ex would certainly have tax consequences (which is why she needs a tax pro, too!).

7 Michele March 5, 2009 at 9:42 am

My ex paid me unspecified support for a previous tax year. There was no “separation instrument” though we would both agree to claimingit as alimony. But the CPA said that there has to be a court order. What if you are in agreement? Does there still have to be a legal document of alimony? I am not comfortable with filing joint, because of other issues. Can we create some type of legal document after the fact?

8 Kelly March 5, 2009 at 10:59 am

I think your CPA is concerned that the support will appear voluntary absent a court order/written agreement and would not be treated as alimony. I would have the same concern.
If you qualify as single under the filing rules, you wouldn’t have to file jointly, irrespective of the alimony issue. I’d first determine your filing status and then tackle the support issue.
For your own protection, I think you should consult with an attorney and figure out what should be memorialized (I’m guessing that a support agreement would be at the top).

9 Jeff January 19, 2012 at 2:23 pm

My ex and I are officially divorced as of July of last year. We entered a certified agreement for alimony into our divorce decree, but after it was finalized, she had a change of heart and verbally changed the agreement. I have finished paying her as per our verbal agreement, but I would like to deduct my payments from my taxes for 2011. Can I do this based on a verbal agreement between us? Does it have to be in writing to be able to deduct alimony?

10 Craig June 25, 2012 at 5:49 pm

I Live in Nevada, and i need to make sure i use the correct wording in my divorce decree so that the alimony is a deductable. Please let me know if you can help me with the wording.

thanks
Craig

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