Alimony or separate maintenance payments that are made by an obligor spouse to an obligee spouse or to a third party on behalf of the obligee are deductible from the obligor’s income provided that the payments are made pursuant to a written agreement that was executed after 1984 and that :(1) the obligor and the obligee do not file a joint tax return; (2) the obligor makes payments in cash, check, or money order; (3) the written instrument states that the payment is alimony or separate maintenance; (4) the obligor and the obligee are not part of the same household when the payments are made, except if the divorce or separation case is pending; (5) there is no obligation to pay the obligee after the obligee’s death; and (6) the payment is not treated as child support.
A written instrument can consist of a divorce decree, a decree of separate maintenance, a written instrument that is incident to a divorce or separate maintenance decree, a written separation agreement, or any decree or court order that requires one spouse to make support payments to or on behalf of the other. The written instrument does not have to be a final court order but can be a decree pendente lite, which is an order that is entered to provide support for a spouse while litigation is pending.
Payments that can qualify for alimony treatment will depend on the wording of the written document. Such payments include: the payment of life insurance premiums on the obligor’s life, to the extent that the obligee owns the policy; payments for medical expenses; housing costs or a portion of the mortgage payments on a jointly-owned home, and; a portion of the taxes and insurance on a jointly-owned home.
Payments that do not qualify for alimony treatment include any payments that are related to a distribution of property or other marital assets and child support. Also excluded are any payments that are contingent on an event that relates to the parties child because that gives rise to a presumption that the payments are in the nature of child support, which are not deductible. One example would be if alimony payments were to cease upon the child reaching age 18. An obligor can rebut the presumption by showing that the time at which the alimony ceased was determined independently of a contingency related to the child.
In order to claim the deduction, the obligor must provide the social security number of the obligee. If the obligor fails to provide the social security number of the obligee, the obligor may face a penalty and the claim for the deduction may be disallowed. The deduction can be claimed without filing an itemized tax return by indicating the amount on the 1040 form.
An obligee who receives the alimony payment must report those payments as regular income on the 1040 form. The obligee must provide his or her social security number to the obligor or face a monetary penalty
Alimony payments may be subject to recapture if they decrease or end during the first three calendar years. An example of a decrease would be if the support order was modified to a lower amount to reflect changed circumstances. If that happens, the alimony deducted by the obligor must be declared by the obligor as income during that third year.