Alimony and Child Support

There's a tax difference between alimony and child support payments. If you make qualified alimony payments, you can deduct them. The payments that your former spouse receives, however, are considered taxable income to your former spouse. Child support is tax-free income to the recipient and nondeductible by the payor spouse..

To qualify for the alimony deduction, the payment must be:

1. Made in cash

2. Received by, or on behalf of, a spouse under a divorce or separation instrument

3. The instrument may not expressly exclude the payment from the being included in the recipient's income or deducted by the payor spouse.

4. If the spouses are divorced or legally separated, they cannot be members of the same household when the payment is made.

5. Liability for payments must cease upon the death of either spouse.

If the amount you pay hinges on the life event of a child, the payment (or the portion affected by the event) can't be claimed as alimony.

Example: If your divorce decree states that the payment will be reduced when your child graduates from high school, the portion of the payment affected by this event can’t be claimed as an alimony deduction by the payor spouse and will not be included in the income of the payee spouse.

To prevent large payments in the first few years after a divorce from being deductible as alimony rather than treated as a nondeductible property settlement, the law provides for recapture of certain alimony deductions. You’re subject to the recapture rule in the third year if:

• The alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year, or
• The alimony you pay in the third year decreases by more than $15,000 from the second year.

You don’t have to worry about recapture at all if payments stop in the second or third year because your former spouse dies or remarries.

For more information, see IRS Publication 504: Divorced or Separated Individuals.