Alimony Tax  Deductions and Taxation

Alimony is Both Deductible and Taxable

Alimony is considered taxable income for the payee and deductible by the payer.

You can deduct from income the amount of alimony or separate maintenance you paid, and you must include in your income the amount of alimony or separate maintenance you received.

Amounts paid under divorce or separate maintenance decrees between you and your spouse or former spouse are considered alimony by Federal tax rules.

If your decree of divorce or separate maintenance provides for alimony and child support, and you pay less than the total required, the payments apply first to child support which is not deductible. Any remaining amount is considered alimony.

Property settlements, whether in a lump sum or installments, do not qualify as alimony.

Voluntary payments not required by a divorce decree or separation instrument do not qualify as alimony.

The spouse or former spouse who is receiving the alimony must report the full amount as income on Form 1040.

It's important for both the payer and recipient to have alimony payments clearly defined in the divorce agreement. The payer of alimony will not have to itemize the deduction since it's considered an "above the line" deduction.

Why would you want to pay alimony?

Alimony or spousal support offers tax advantages that can be financially helpful to both spouses. If you and your spouse have dramatically different incomes, there may be some tax advantages to using alimony for tax benefits.

Be careful writing your divorce decree, an annulment or separation can complicate your tax return