Couples who divorce face legal issues such as division of property, child custody, child support and spousal support. Spousal support, also called alimony, is often awarded to the spouse who earns less than the other. Its purpose is to provide financial assistance to a spouse who needs time to become self-supporting after the divorce. Alimony payments are taxable for the receiving spouse and tax deductible for the paying spouse, provided that certain requirements are met.
The IRS will consider a payment to be alimony if: the spouses do not file a joint return together; the payment is in the form of cash, check or money order; the payment is made in accordance with a divorce or separation agreement; the agreement does not state that the payment is not alimony; there is no liability to continue payment after the recipient spouse's death; and the payment is not treated as child support or a property settlement. If spouses are legally separated, then the payment must not be made when the spouses are members of the same household.
Some payments are not considered alimony and, are, therefore, not tax deductible, such as child support. Even when payments are presented as alimony, the IRS may consider them to be child support payments if the termination of those payments is related to the children, such as when they turn 18 or graduate college. Other forms of non-tax-deductible payments are property settlements, payments that are part of the receiving spouse's community property income, payments to maintain the paying spouse's property and any voluntary payments that are not required by the divorce or separation agreement.
Alimony payments must be reported as taxable income for the receiving spouse, but spouses can make spousal support payments nontaxable if they both agree in the divorce or separation agreement to make the payments nondeductible as well. It is important for both spouses to consider these tax implications of paying and receiving spousal support when negotiating divorce settlements.
Source: IRS, "Topic 452 - Alimony," accessed August 25, 2017