| Publication 17 |
2008 Tax Year |
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.
Definitions.
The following definitions apply throughout this chapter.
Spouse or former spouse.
Unless otherwise stated, the term “ spouse” includes former spouse.
Divorce or separation instrument.
The term “ divorce or separation instrument” means:
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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).
Useful Items - You may want to see:
The following rules apply to alimony regardless of when the divorce or separation instrument was executed.
Payments not alimony.
Not all payments under a divorce or separation instrument are alimony. Alimony does not include:
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Child support,
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Noncash property settlements,
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Payments that are your spouse's part of community income as explained under Community Property in Publication 504,
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Payments to keep up the payer's property, or
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Use of the payer's property.
Payments to a third party.
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. The payments are treated as received by your spouse and then paid
to the third party.
Life insurance premiums.
Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the
extent your spouse owns the policy.
Payments for jointly-owned home.
If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse
or former spouse, some of your payments may be alimony.
Mortgage payments.
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 one-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 one-half of the payments
as alimony received. If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-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 one-half
of these payments as alimony. Your spouse must report one-half of these payments as alimony received. If you and your spouse
itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance.
If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are
alimony. But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance.
Other payments to a third party.
If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony.
Instruments Executed After 1984
The following rules for alimony apply to payments under divorce or separation instruments executed after 1984.
Exception for instruments executed before 1985.
There are two situations where the rules for instruments executed after 1984 apply to instruments executed before
1985.
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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.
For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see the 2004 revision
of Publication 504 on the IRS website at www.irs.gov.
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.
Example 2.
Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. In this example, the decree of divorce is not treated
as executed before 1985. The alimony payments are subject to the rules for payments under instruments executed after 1984.
Alimony requirements.
A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint
return with each other and all the following requirements are met.
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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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The payment is not treated as child support.
Each of these requirements is discussed next.
Cash payment requirement.
Only cash payments, including checks and money orders, qualify as alimony. The following do not qualify as alimony.
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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.
Payments to a third party.
Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments
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 of your spouse may qualify as alimony if all the
following requirements are met.
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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 designated as not alimony.
You and your spouse can designate that otherwise qualifying payments are not alimony. You do this by including a provision
in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable
from your spouse's income. For this purpose, any instrument (written statement) signed by both of you that makes this designation
and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce
or separation instrument). If you are subject to temporary support orders, the designation must be made in the original or
a later temporary support order.
Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them
as not alimony to his or her return. The copy must be attached each year the designation applies.
Spouses cannot be members of the same household.
Payments to your spouse while you are members of the same household are not alimony if you are legally separated
under a decree of divorce or separate maintenance. A home you formerly shared is considered one household, even if you physically
separate yourselves in the home.
You are not treated as members of the same household if one of you is preparing to leave the household and does leave
no later than 1 month after the date of the payment.
Exception.
If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation
agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when
the payment is made.
Liability for payments after death of recipient spouse.
If any part of payments you make must continue to be made for any period after your spouse's death, that part of your
payments is not alimony, whether made before or after the death. If all of the payments would continue, then none of the payments
made before or after the death are alimony.
The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your
spouse if, for example, the liability for continued payments would end under state law.
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.
Substitute payments.
If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise
qualifying payments before the death, the otherwise qualifying payments are not alimony. To the extent that your payments
begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated
as payments that were not alimony. Whether or not such payments will be treated as not alimony depends on all the facts and
circumstances.
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.
Child support.
A payment that is specifically designated as child support or treated as specifically designated as child support
under your divorce or separation instrument is not alimony. The amount of child support may vary over time. Child support
payments are not deductible by the payer and are not taxable to the recipient.
Specifically designated as child support.
A payment will be treated as specifically designated as child support to the extent that the payment is reduced either:
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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.
A payment may be treated as specifically designated as child support even if other separate payments are specifically designated
as child support.
Contingency relating to your child.
A contingency relates to your child if it depends on any event relating to that child. It does not matter whether
the event is certain or likely to occur. Events relating to your child include the child's:
Clearly associated with a contingency.
Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the
happening of a contingency relating to your child only in the following situations.
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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.
In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency
relating to your child.
Either you or the IRS can overcome the presumption in the two situations just described. This is done by showing that
the time at which the payments are to be reduced was determined independently of any contingencies relating to your children.
For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period
equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as
alimony.
How To Deduct Alimony Paid
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.
How To Report Alimony Received
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.
When to apply the recapture rule.
You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more
than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony
you pay in the first year.
When you figure a decrease in alimony, do not include the following amounts.
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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.
Figuring the recapture.
You can use Worksheet 1 in Publication 504 to figure recaptured alimony.
Including the recapture in income.
If you must include a recapture amount in income, show it on Form 1040, line 11 (“ Alimony received”). Cross out “ received” and enter “ recapture.” On the dotted line next to the amount, enter your spouse's last name and social security number.
Deducting the recapture.
If you can deduct a recapture amount, show it on Form 1040, line 31a (“ Alimony paid”). Cross out “ paid” and enter “ recapture.” In the space provided, enter your spouse's social security number.
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