Table of Contents
This chapter discusses the rules that apply if you pay or receive alimony. It covers the following topics.
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What payments are alimony.
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What payments are not alimony, such as child support.
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How to deduct alimony you paid.
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How to report alimony you received as income.
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Whether you must recapture the tax benefits of alimony. Recapture means adding back in your income all or part of a deduction you took in a prior year.
Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument.
Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony.
To be alimony, a payment must meet certain requirements. Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. This chapter discusses the rules for payments under instruments executed after 1984. If you need the rules for payments under pre-1985 instruments, get and keep a copy of the 2004 version of Publication 504. That was the last year the information on pre-1985 instruments was included in Publication 504.
Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony.
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A decree of divorce or separate maintenance or a written instrument incident to that decree,
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A written separation agreement, or
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A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).
The following rules apply to alimony regardless of when the divorce or separation instrument was executed.
The following rules for alimony apply to payments under divorce or separation instruments executed after 1984.
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A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply.
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A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that:
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Changes the amount or period of payment, or
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Adds or deletes any contingency or condition.
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Example 1.
In November 1984, you and your former spouse executed a written separation agreement. In February 1985, a decree of divorce was substituted for the written separation agreement. The decree of divorce did not change the terms for the alimony you pay your former spouse. The decree of divorce is treated as executed before 1985. Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984.
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The payment is in cash.
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The instrument does not designate the payment as not alimony.
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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.
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There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
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Transfers of services or property (including a debt instrument of a third party or an annuity contract).
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Execution of a debt instrument by the payer.
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The use of the payer's property.
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The payments are in lieu of payments of alimony directly to your spouse.
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The written request states that both spouses intend the payments to be treated as alimony.
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You receive the written request from your spouse before you file your return for the year you made the payments.
Payments ARE alimony if all of the following are true: | Payments are NOT alimony if any of the following are true: |
Payments are required by a divorce or separation instrument. | Payments are not required by a divorce or separation instrument. |
Payer and recipient spouse do not file a joint return with each other. | Payer and recipient spouse file a joint return with each other. |
Payment is in cash (including checks or money orders). | Payment is:
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Payment is not designated in the instrument as not alimony. | Payment is designated in the instrument as not alimony. |
Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. | Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. |
Payments are not required after death of the recipient spouse. | Payments are required after death of the recipient spouse. |
Payment is not treated as child support. | Payment is treated as child support. |
These payments are deductible by the payer and includible in income by the recipient. | These payments are neither deductible by the payer nor includible in income by the recipient. |
Example.
You must pay your former spouse $10,000 in cash each year for 10 years. Your divorce decree states that the payments will end upon your former spouse's death. You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. The death of your spouse would not terminate these payments under state law.
The $10,000 annual payments may qualify as alimony. The $20,000 annual payments that do not end upon your former spouse's death are not alimony.
Example 1.
Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 6 years or upon your former spouse's death, if earlier.
Your former spouse has custody of your minor children. The decree provides 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 child reaches 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 former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Of each of the $30,000 annual payments, $10,000 is not alimony.
Example 2.
Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. For example, if your spouse dies 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 after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. None of the annual payments are alimony. The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment.
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On the happening of a contingency relating to your child, or
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At a time that can be clearly associated with the contingency.
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Becoming employed,
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Dying,
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Leaving the household,
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Leaving school,
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Marrying, or
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Reaching a specified age or income level.
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The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority.
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The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. This certain age must be the same for each child, but need not be a whole number of years.
You can deduct alimony you paid, whether or not you itemize deductions on your return. You must file Form 1040. You cannot use Form 1040A or Form 1040EZ.
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.
If you paid alimony to more than one person, enter the social security number of one of the recipients. Show the social security number and amount paid to each other recipient on an attached statement. Enter your total payments on line 31a.
If you do not provide your spouse's social security number, you may have to pay a $50 penalty and your deduction may be disallowed.
Report alimony you received as income on Form 1040, line 11. You cannot use Form 1040A or Form 1040EZ.
You must give the person who paid the alimony your social security number. If you do not, you may have to pay a $50 penalty.
If your alimony payments decrease or terminate during the first 3 calendar years, you may be subject to the recapture rule. If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Your spouse can deduct in the third year part of the alimony payments he or she previously included in income.
The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Do not include any time in which payments were being made under temporary support orders. The second and third years are the next 2 calendar years, whether or not payments are made during those years.
The reasons for a reduction or termination of alimony payments that can require a recapture include:
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A change in your divorce or separation instrument,
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A failure to make timely payments,
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A reduction in your ability to provide support, or
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A reduction in your spouse's support needs.
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Payments made under a temporary support order.
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Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment.
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Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year.
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