Tax Ramifications of Alimony

Step 1. Determine which payments you made qualify as alimony.

Payments that are NOT alimony:  Not all payments under a divorce or separation instrument are alimony. Alimony does not include:

• Child support;
• Non-cash property settlements;
• Payments that are your spouse's part of community income, as explained under Community Property in Pub. 504;
• Payments to keep up the payer's property; or
• Use of the payer's property.

 
Requirements for a payment to be alimony:

1. Payments are in cash (includes: checks or money orders)
2. The instrument does not designate the payment as not alimony.
3. The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
4. There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
5. The payment is not treated as child support.

 
General Rules for alimony payments:

• Payments to Third Parties:  Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc.), taxes, tuition, etc.
• Life Insurance Premiums: Premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy are alimony payments.
• Mortgage Payments on a Jointly Owned Home: If you must pay all the mortgage payments (principal and interest) on a jointly owned home, and they otherwise qualify as alimony, you can deduct half of the total payments as alimony. If you itemize deductions and the home is a qualified home, you can claim half of the interest in figuring your deductible interest. Your spouse must report half of the payments as alimony received. If your spouse itemizes deductions and the home is a qualified home, he or she can claim half of the interest on the mortgage in figuring deductible interest.
• Taxes and Insurance: If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct half of these payments as alimony. Your spouse must report half of these payments as alimony received. If you and your spouse itemize deductions, you can each claim half of the real estate taxes and none of the home insurance. However, if your home is held as tenants by the entirety or joint tenants, then none of your payments for taxes or insurance are alimony.

 
Step 2. Mark down alimony payments made or received on your taxes:
      
a) How to Deduct Alimony Paid on your Taxes:

1. You must file Form 1040. You cannot use Form 1040A or Form 1040EZ.
   1. : You can deduct alimony you paid, whether or not you itemize deductions on your return. 
2. Enter the amount of alimony you paid on Form 1040, line 31a. In the space provided on line 31b, enter your spouse's social security number (SSN) or individual taxpayer identification number (ITIN).
   1. : If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Show the SSN or ITIN and amount paid to each additional recipient on an attached statement. Enter your total payments on line 31a.
3. : If you do not provide your spouse's SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. For more information on SSNs and ITIN

b) How to Report Alimony Received on your Taxes:

1. Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. You cannot use Form 1040A or Form 1040EZ.
2. : You must give the person who paid the alimony your SSN or ITIN. If you do not, you may have to pay a $50 penalty.

 
For more information go to https://www.irs.gov/publications/p17/ch18.html. 

If you would like to speak with a family law attorney in regards to alimony, contact Adkins Law. Adkins Law has offices in Huntersville and Ballantyne for your convenience. 

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