Alimony Alimony is a payment to or for a spouse or former spouse under adivorce or separation instrument. It does not include voluntarypayments that are not made under a divorce or separation instrument. Alimony is deductible by the payer and must be included in thespouse's or former spouse's income. Although this discussion isgenerally written for the payer of the alimony, the recipient can usethe information to determine whether an amount received is alimony. To be alimony, a payment must meet certain requirements. Differentrequirements apply to payments under instruments executed after 1984and to payments under instruments executed before 1985. Theserequirements are discussed later. Spouse or former spouse.Unless otherwise stated in the following discussions about alimony,the term "spouse" includes former spouse. Divorce or separation instrument.The term "divorce or separation instrument" means: A decree of divorce or separate maintenance or a writteninstrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse tomake payments for the support or maintenance of the other spouse. Thisincludes a temporary decree, an interlocutory (not final) decree, anda decree of alimony pendente lite (while awaiting action onthe final decree or agreement). Invalid decree.Payments under a divorce decree can be alimony even if the decree'svalidity is in question. A divorce decree is valid for tax purposesuntil a court having proper jurisdiction holds it invalid. Amended instrument.Heraklion luxury hotelsAn amendment to a divorce decree may change the nature of yourpayments. Amendments are not ordinarily retroactive for federal taxpurposes. However, a retroactive amendment to a divorce decreecorrecting a clerical error to reflect the original intent of thecourt will generally be effective retroactively for federal taxpurposes. Example 1.A court order retroactively corrected a mathematical error underyour divorce decree to express the original intent to spread thepayments over more than 10 years. This change also is effectiveretroactively for federal tax purposes. Example 2.Your original divorce decree did not fix any part of the payment aschild support. To reflect the true intention of the court, a courtorder retroactively corrected the error by designating a part of thepayment as child support. The amended order is effective retroactivelyfor federal tax purposes. Deducting alimony paid.You can deduct alimony you paid, whether or not you itemizedeductions on your return. You must file Form 1040. You cannot useForm 1040A or Form 1040EZ. Enter the amount of alimony you paid on line 31a (Form 1040). Inthe space provided on line 31b, enter your spouse's or former spouse'ssocial security number. If you paid alimony to more than one person, enter the socialsecurity number of one of the recipients. Show the social securitynumber and amount paid to each other recipient on an attachedstatement. Enter your total payments on line 31a. Caution: If you do not provide your spouse's or former spouse's socialsecurity number, you may have to pay a $50 penalty and your deductionmay be disallowed. Reporting alimony received.Report alimony you received on line 11 of Form 1040. You cannot useForm 1040A or Form 1040EZ. Caution: You must give the person who paid the alimony your social securitynumber. If you do not, you may have to pay a $50 penalty. Withholding on nonresident aliens.If you are a U.S. citizen or resident and you pay alimony to anonresident alien spouse or former spouse, you must withhold incometax at a rate of 30% (or lower treaty rate) on each payment unless youare exempted by an income tax treaty. For more information, getPublication 515, Withholding of Tax on Nonresident Aliens andForeign Corporations. General Rules The following rules apply to alimony regardless of when the divorceor separation instrument was executed. Payments not alimony.Not all payments under a divorce or separation instrument arealimony. Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, asexplained later under Community Property, Payments to keep up the payer's property. or Use of property. Example.Under your written separation agreement, your spouse livesrent-free in a home you own and you must pay the mortgage, real estatetaxes, insurance, repairs, and utilities for the home. Because you ownthe home and the debts are yours, your payments for the mortgage, realestate taxes, insurance, and repairs are not alimony. Neither is thevalue of your spouse's use of the home. If they otherwise qualify, you can deduct the payments forutilities as alimony. Your spouse must report them as income. If youitemize deductions, you can deduct the real estate taxes and, if thehome is a qualified home, you can also include the interest on themortgage in figuring your deductible interest. Child support.To determine whether a payment is child support, see the separatediscussions under Instruments Executed After 1984 orInstruments Executed Before 1985, later. Underpayment.If both alimony and child support payments are called for by yourdivorce or separation instrument, and you pay less than the totalrequired, the payments apply first to child support and then toalimony. Example.Your divorce decree calls for you to pay your former spouse $200 amonth as child support and $150 a month as alimony. If you pay thefull amount of $4,200 during the year, you can deduct $1,800 asalimony and your former spouse must report $1,800 as alimony received.If you pay only $3,600 during the year, $2,400 is child support. Youcan deduct only $1,200 as alimony and your former spouse must report$1,200 as alimony received. Payments to a third party.Cash payments (including checks and money orders) to a third partyon behalf of your spouse under the terms of your divorce or separationinstrument may be alimony, if they otherwise qualify. These includepayments for your spouse's medical expenses, housing costs (rent,utilities, etc.), taxes, tuition, etc. The payments are treated asreceived by your spouse and then paid to the third party. Example 1.Under your divorce decree, you must pay your former spouse'smedical and dental expenses. If the payments otherwise qualify, youcan deduct them as alimony on your return. Your former spouse mustreport them as alimony received and can include them in figuringdeductible medical expenses. Example 2.Under your separation agreement, you must pay the real estatetaxes, mortgage payments, and insurance premiums on a home owned byyour spouse. If they otherwise qualify, you can deduct the payments asalimony on your return, and your spouse must report them as alimonyreceived. If itemizing deductions, your spouse can deduct the realestate taxes and, if the home is a qualified home, also include theinterest on the mortgage in figuring deductible interest. Life insurance premiums.Alimony includes premiums you must pay under your divorce orseparation instrument for insurance on your life to the extent yourspouse owns the policy. Payments for jointly-owned home.If your divorce or separation instrument states that you must payexpenses for a home owned by you and your spouse or former spouse,some of your payments may be alimony. See Table 2. Table 2. Expenses for a Jointly-Owned Home Instruments Executed After 1984 The following rules for alimony apply to payments under divorce orseparation instruments executed after 1984. They also apply to alimonypayments under earlier instruments that were modified after 1984 to: Specify that these rules will apply, or Change the amount or period of payment or add or delete anycontingency or condition. The rules in this section do not apply to divorce or separationinstruments executed after 1984 if the terms for alimony are unchangedfrom an instrument executed before 1985. For the rules for alimonypayments under other pre-1985 instruments, see InstrumentsExecuted Before 1985, later. Example 1.In November 1984, you and your former spouse executed a writtenseparation agreement. In February 1985, a decree of divorce wassubstituted for the written separation agreement. The decree ofdivorce did not change the terms for the alimony you pay your formerspouse. The decree of divorce is treated as executed before 1985.Alimony payments under this decree are not subject to the rules forpayments under instruments executed after 1984. Example 2.Assume the same facts as in Example 1 except that the decree ofdivorce changed the amount of the alimony. In this example, the decreeof divorce is not treated as executed before 1985. The alimonypayments are subject to the rules for payments under instrumentsexecuted after 1984. Alimony Requirements A payment to or for a spouse under a divorce or separationinstrument is alimony if the spouses do not file a joint return witheach other and all the following requirements are met. The payment is in cash. The instrument does not designate the payment as notalimony. The spouses are not members of the same household at thetime the payments are made. This requirement applies only if thespouses are legally separated under a decree of divorce or separatemaintenance. There is no liability to make any payment (in cash orproperty) after the death of the recipient spouse. The payment is not treated as child support. Each of these requirements is discussed below. Payment must be in cash.Only cash payments, including checks and money orders, qualify asalimony. The following do not qualify as alimony. Transfers of services or property (including a debtinstrument of a third party or an annuity contract). Execution of a debt instrument by the payor. The use of property. Payments to a third party.Cash payments to a third party under the terms of your divorce orseparation instrument can qualify as a cash payment to your spouse.See Payments to a third party under General Rules,earlier. Also, cash payments made to a third party at the written request ofyour spouse qualify as alimony if all the followingrequirements are met. The payments are in lieu of payments of alimony directly toyour spouse. The written request states that both spouses intend thepayments to be treated as alimony. You receive the written request from your spouse before youfile your return for the year you made the payments. Payments designated as not alimony.You and your spouse can designate that otherwise qualifyingpayments are not alimony. You do this by including a provision in yourdivorce or separation instrument that states the payments are notdeductible by you and are excludable from your spouse's income. Forthis purpose, any instrument (written statement) signed by both of youthat makes this designation and that refers to a previous writtenseparation agreement is treated as a written separation agreement. Ifyou are subject to temporary support orders, the designation must bemade in the original or a later temporary support order. Your spouse can exclude the payments from income only if he or sheattaches a copy of the instrument designating them as not alimony tohis or her return. The copy must be attached each year the designationapplies. Spouses cannot be members of the same household.Payments to your spouse while you are members of the same householdare not alimony if you are legally separated under a decree of divorceor separate maintenance. A home you formerly shared is considered onehousehold, even if you physically separate yourselves in the home. You are not treated as members of the same household if one of youis preparing to leave the household and does leave no later than onemonth after the date of the payment. Exception.If you are not legally separated under a decree of divorce orseparate maintenance, a payment under a written separation agreement,support decree, or other court order may qualify as alimony even ifyou are members of the same household when the payment is made. Liability for payments after death of recipient spouse.If you must continue to make payments for any period after yourspouse's death, none of the payments made before or after the deathare alimony. The divorce or separation instrument does not have to expresslystate that the payments cease upon the death of your spouse if, forexample, the liability for continued payments would end under statelaw. Example.You must pay your former spouse $10,000 in cash each year for 10years. Your divorce decree states that the payments will end upon yourformer spouse's death. You must also pay your former spouse or yourformer spouse's estate $20,000 in cash each year for 10 years. Thedeath of your spouse would not terminate these payments under statelaw. The $10,000 annual payments are alimony. But because the $20,000annual payments will not end upon your former spouse's death, they arenot alimony. Substitute payments.If you must make any payments in cash or property after yourspouse's death as a substitute for continuing otherwise qualifyingpayments, the otherwise qualifying payments are not alimony. To theextent that your payments begin, accelerate, or increase because ofthe death of your spouse, otherwise qualifying payments you made maybe treated as payments that were not alimony. Whether or not suchpayments will be treated as not alimony depends on all the facts andcircumstances. Example 1.Under your divorce decree, you must pay your former spouse $30,000annually. The payments will stop at the end of 6 years or upon yourformer spouse's death, if earlier. Your former spouse has custody of your minor children. The decreeprovides that if any child is still a minor at your spouse's death,you must pay $10,000 annually to a trust until the youngest childreaches the age of majority. The trust income and corpus (principal)are to be used for your children's benefit. These facts indicate that the payments to be made after your formerspouse's death are a substitute for $10,000 of the $30,000 annualpayments. $10,000 of each of the $30,000 annual payments is notalimony. Example 2.Under your divorce decree, you must pay your former spouse $30,000annually. The payments will stop at the end of 15 years or upon yourformer spouse's death, if earlier. The decree provides that if yourformer spouse dies before the end of the 15-year period, you must paythe estate the difference between $450,000 ($30,000 15) andthe total amount paid up to that time. For example, if your spousedies at the end of the tenth year, you must pay the estate $150,000($450,000 - $300,000). These facts indicate that the lump-sum payment to be made afteryour former spouse's death is a substitute for the full amount of the$30,000 annual payments. None of the annual payments are alimony. Theresult would be the same if the payment required at death were to bediscounted by an appropriate interest factor to account for theprepayment. Child support.A payment that is specifically designated as child support ortreated as specifically designated as child support under your divorceor separation instrument is not alimony. The designated amount or partmay vary from time to time. Child support payments are neitherdeductible by the payer nor taxable to the payee. Specifically designated as child support.A payment will be treated as specifically designated as childsupport to the extent that the payment is reduced either: On the happening of a contingency relating to your child,or At a time that can be clearly associated with thecontingency. A payment may be treated as specifically designated as childsupport even if other separate payments are specifically designated aschild support. Contingency relating to your child.A contingency relates to your child if it depends on any eventrelating to that child. It does not matter whether the event iscertain or likely to occur. Events relating to your child include thechild's: Becoming employed, Dying, Leaving the household, Leaving school, Marrying, or Reaching a specified age or income level. Clearly associated with a contingency.Payments are presumed to be reduced at a time clearly associatedwith the happening of a contingency relating to your child only in thefollowing situations. The payments are to be reduced not more than 6 months beforeor after the date the child will reach 18, 21, or local age ofmajority. The payments are to be reduced on two or more occasions thatoccur not more than one year before or after a different one of yourchildren reaches a certain age from 18 to 24. This certain age must bethe same for each child, but need not be a whole number of years. In all other situations, reductions in payments are not treatedas clearly associated with the happening of a contingency relating toyour child. Either you or the IRS can overcome the presumption in the twosituations above. This is done by showing that the time at which thepayments are to be reduced was determined independently of anycontingencies relating to your children. For example, if you can showthat the period of alimony payments is customary in the localjurisdiction, such as a period equal to one-half of the duration ofthe marriage, you can treat the amount as alimony. Recapture of Alimony If your alimony payments decrease or terminate during the first 3calendar years, you may be subject to the recapture rule. If you aresubject to this rule, you have to include in income in the third yearpart of the alimony payments you previously deducted. Your spouse candeduct in the third year part of the alimony payments he or shepreviously included in income. The 3-year period starts with the first calendar year you make apayment qualifying as alimony under a decree of divorce or separatemaintenance or a written separation agreement. Do not include any timein which payments were being made under temporary support orders. Thesecond and third years are the next 2 calendar years, whether or notpayments are made during those years. The reasons for a reduction or termination of alimony payments thatcan require a recapture include: A change in your divorce or separation instrument, A failure to make timely payments, A reduction in your ability to provide support, or A reduction in your spouse's support needs. When to apply the recapture rule.You are subject to the recapture rule in the third year if thealimony you pay in either the second year or the third year decreasesby more than $15,000 from the prior year. When you figure a decrease in alimony, do not include the followingamounts. Payments made under a temporary support order. Payments required over a period of at least 3 calendar yearsof a fixed part of your income from a business or property, or fromcompensation for employment or self-employment. Payments that decrease because of the death of either spouseor the remarriage of the spouse receiving the payments. How to figure and report the recapture.Both you and your spouse can use Table 3 to figurerecaptured alimony. Including the recapture in income.If you must include a recapture amount in income, show it on Form1040, line 11 ("Alimony received"). Cross out "received" andwrite "recapture." On the dotted line next to the amount, enteryour spouse's last name and social security number. Deducting the recapture.If you can deduct a recapture amount, show it on Form 1040, line31a ("Alimony paid"). Cross out "paid" and write"recapture." In the space provided, enter your spouse's socialsecurity number. Table 3. Worksheet for Recapture of Alimony Instruments Executed Before 1985 The following rules for alimony apply to payments under divorce orseparation instruments executed before 1985. However, if theinstrument was modified after 1984 to specify that the rules forinstruments executed after 1984 apply, or to change the termsregarding the amount or period of payment or other contingency orcondition, follow the rules under Instruments Executed After1984, earlier. Alimony Requirements A payment to or for a spouse under a divorce or separationinstrument is alimony if the spouses do not file a joint return andthe payment meets both of the following requirements. It is based on the marital or family relationship. It is not child support. In addition, the spouses must be separated and living apart fora payment under a separation agreement or court order to qualify asalimony. Payments of a fixed sum.If you must pay a fixed sum in installments, your payments duringthe year that you treat as alimony cannot be more than 10% of thefixed sum. This limit applies to payments for the current year andpayments in advance, but not to late payments for an earlier year. However, do not treat any part of a late installment payment asalimony if the fixed sum was payable over a period ending 10 years orless from the date of the divorce or separation instrument. Payments subject to contingencies.Payments are not considered installment payments of a fixed sum ifthey are to end or change in amount on the happening of one ormore of the following contingencies. The death of you or your spouse. The remarriage of your spouse. A change in the economic status of you or your spouse. The contingency may be either specified in your instrument orimposed by local law. Marital or family relationship.To be alimony, your payments must be based on your obligation,because of the marital or family relationship, to continue supportingyour spouse. Any payment that does not arise out of that supportobligation, such as the repayment of a loan, is not alimony. Property settlement.Payments are not based on your obligation to continue support ifthey are a settlement of property rights. However, even if a statecourt describes payments made under a divorce decree as payments forproperty rights, they are alimony if they are made to fulfill a legalsupport obligation and they otherwise qualify. Child support.A payment that is specifically designated as child support underyour divorce or separation instrument is not alimony. If theinstrument calls for payments that otherwise qualify as alimony anddoes not separately designate an amount as child support, all thepayments are alimony. This is true even if the payments are subject toa contingency relating to your child. Example.Your divorce decree states that you must pay your former spouse$400 a month for life for the support of your former spouse and yourchild. The payment is to be reduced to $300 upon the first of thefollowing to happen: the child's death, the child's 22nd birthday, orthe child's marriage. Despite these contingencies, no amount of childsupport is fixed by the decree. The entire payment is alimony. Alimony Trusts, Annuities,and Endowment Contracts If you transferred property to a trust or bought or transferred anannuity or endowment contract to pay the alimony you owe, the trustincome or other proceeds that would ordinarily be includible in yourincome must be included in your former spouse's income as alimonyreceived. You do not include the payments in your income, nor can youdeduct them as alimony paid. This rule applies whether the proceedsare from the earnings or the principal of the transferred property. Itdoes not apply to any trust income that is fixed for child support. Example.You must make monthly alimony payments of $500. You bought yourformer spouse a commercial annuity contract paying $500 a month. Yourformer spouse must include the full amount received under the contractin income, as alimony. It does not matter whether the amount is paidout of principal or interest. You do not include any part of thepayment in your income, nor can you deduct any part. Annuity and endowment contracts.Hotels Royal RiminiProceeds from annuity and endowment contracts bought for ortransferred to a spouse after July 18, 1984, cannot be treated asalimony. However, this does not apply to contracts bought ortransferred to pay alimony under a divorce or separation instrumentexecuted before July 19, 1984, unless both spouses choose to have itapply. Proceeds not alimony.If the proceeds from an annuity or endowment contract cannot betreated as alimony, the amount received is reduced by the cost of thecontract. Get Publication 575, Pension and Annuity Income,for information on reporting annuities, and Publication 525,Taxable and Nontaxable Income, for information on reportingendowment proceeds. If the proceeds from a trust cannot be treated as alimony, see therules for reporting trust income in Publication 525.