A question I get often during consultations in dissolution of marriage cases is what are the tax implications for paying or receiving alimony or spousal support. The presumption under the IRS Regulations is that alimony paid is a tax deduction for the payer spouse or former spouse, and is taxable income for the recipient spouse or former spouse. What is defined as alimony, or stated another way, what is not considered alimony, in the eyes of the IRS is critical to consider when you are entering into a divorce or separation agreement.
In order for the IRS to consider such payments as alimony, all of the following elements or factors are required to be in place:
- Payments are required by a divorce or separation instrument (this can
also include a temporary written agreement while awaiting final
- Payer and recipient spouse do not file a joint tax return.
- Payments must be in cash (which would include checks or money
- Spouses that are divorced under a divorce document or decree do not
- Payments are not treated or classified as child support.
- Payments are not required after death of the recipient spouse under
that state’s law.
If all of the above factors are not in place, then such payments most likely will not be considered alimony payments by the IRS. Some useful guides for reference on this issue are IRS Publications 17 and 504. I always recommend that you consult with a tax professional such as an accountant, CPA, or tax attorney on such issues.