If you pay alimony as part of a divorce or separation agreement, you need to know how it will affect your taxes. In order for payments to be considered alimony, they must meet seven requirements:
- You can’t file a joint return with your former partner
- You pay via cash, check, or money order
- The payment goes directly to your former spouse
- The divorce or separation decree does not state specifically that the money is NOT alimony
- You don’t have to continue payments once your former spouse becomes deceased
- The payment isn’t considered child support or property settlement
- You are not living together at the time of payment
Not every payment you make to your spouse as per the legal separation decree is necessarily considered alimony. Alimony payments do not include:
- Voluntary gifts or payments
- Property use
- Payments for property maintenance
- Your spouse’s portion of community property income
- Noncash property settlements
- Child support payments
You can deduct alimony payments that you make throughout the tax year. If you receive alimony, you must add the amount into your total income. You can’t deduct child support, so if the divorce decree lists both, child support will be accounted for first. If you make payments that are less than required, the money first applies to child support.
Noncash property, regardless of how it is paid, isn’t considered alimony, nor is any additional payments made outside the divorce decree.
You don’t have to itemize to deduct alimony payments, although you do have to use a standard Form 1040, U.S. Individual Income Tax Return to file. You need to provide your former spouse’s social security number, or you can face a penalty of up to $50 and disqualification of your deduction, the same as if you fail to report alimony income you may have received.