Is My Alimony Payment Tax Deductible?

This year the tax filing deadline is April 17, 2012.   This dreaded date is now less than a month away and we are in the height of tax season.  It is the time of year where everybody is looking for every possible deduction.  Inevitably someone will ask, “Are my payments to my ex-spouse or soon to be ex-spouse tax-deductible?”   The short answer is … “It depends.”

According to the IRS Payments are considered alimony if all of the following conditions are met:

  • Payment is required by divorce or separation instrument. This can be a final judgment of divorce, property settlement agreement, a pendente lite order, a written separation agreement, or a prenuptial agreement.
  • The parties do not file a joint tax return. This does not mean the parties cannot be currently married. If a divorce was pending, the parties would each be required to file as “married filing separate”.
  • The payment is in cash. This does not the payment of alimony has to be with hard currency. Payments of alimony by check or money order or a probationary department withholding all would qualify as alimony. What is not permitted is the transfer of property to satisfy down the obligation.
  • Payment is not designated in the instrument as not alimony. This means the final judgment of divorce, property settlement agreement, a pendente lite order, a written separation agreement, prenuptial agreement or other written document does not specifically designate the payment as not alimony or not deductible by the payor.
  • Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household.  The parties cannot be living together or otherwise sharing living expenses.
  • Payments are not required after death of the recipient spouse. Alimony is to support a financially dependent spouse. Upon the passing of that spouse there is no longer a need to support that person. Thus payments that are required even in the event of the death of the recipient are not alimony.
  • Payment is not treated as child support.  The payment must be used to support a spouse and not a child. This is the payment should not be dependent upon any event associated with the child. Such events can include but are not limited to, graduation from high school, graduation from college, marriage of the child, employment of the child, marriage of the child, or the child attaining a certain age.

If all of the above conditions are met then the payment should be treated as alimony and deductible by the pay or and includable by the payee.  For more information you can review IRS Publication 17.  If you have specific questions regarding the tax treatment of payments that you have either made or received contact the alimony attorneys at DeMichele & DeMichele or call (856) 546-1350.