Massachusetts Divorce Law - IRS Publication 504: Alimony

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Alimony

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 discussion 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. The requirements that apply to payments under post-1984 instruments are discussed later.
Spouse or former spouse. Unless otherwise stated, 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 written instrument incident to that decree,
  • A written separation agreement, or
  • 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).

Invalid decree. Payments under a divorce decree can be alimony even if the decree's validity is in question. A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid.

Amended instrument. An amendment to a divorce decree may change the nature of your payments. Amendments are not ordinarily retroactive for federal tax purposes. However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes.

Example 1.

A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. This change also is effective retroactively for federal tax purposes.

Example 2.

Your original divorce decree did not fix any part of the payment as child support. To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. The amended order is effective retroactively for federal tax purposes.

Deducting 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, 1040EZ, or 1040NR.

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.

Reporting alimony received. Report alimony as income you received on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. You cannot use Form 1040A, 1040EZ, or 1040NR-EZ.

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.

Withholding on nonresident aliens. If you are a U.S. citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. However, many tax treaties provide for an exemption from withholding for alimony payments. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

General Rules

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:

  • Child support,
  • Noncash property settlements,
  • Payments that are your spouse's part of community income, as explained later under Community Property,
  • Payments to keep up the payer's property, or
  • Use of the payer's property.

Example.

Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. Neither is the value of your spouse's use of the home.

If they otherwise qualify, you can deduct the payments for utilities as alimony. Your spouse must report them as income. If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. However, if your spouse owned the home, see Example 2 under Payments to a third party , later. If you owned the home jointly with your spouse, see Table 4. For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction.

Child support. To determine whether a payment is child support, see the discussion under Instruments Executed After 1984 , later. If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 on the IRS website at IRS.gov.

Underpayment. If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony.

Example.

Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony 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. You can deduct only $1,200 ($3,600 – $2,400) as alimony and your former spouse must report $1,200 as alimony received.

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.

Example 1.

Under your divorce decree, you must pay your former spouse's medical and dental expenses. If the payments otherwise qualify, you can deduct them as alimony on your return. Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses.

Example 2.

Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. However, if you owned the home, see the example under Payments not alimony , earlier. If you owned the home jointly with your spouse, see Table 4 on the previous page.
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. See Table 4.

However, if your spouse owned the home, see Example 2 under Payments to a third party , on this page. If you owned the home, see the example under Payments not alimony , earlier.

Table 4. Expenses for a Jointly-Owned Home

Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction.
IF you must pay all of the ...

 

AND your home is ...
THEN you can deduct and your spouse (or former spouse) must include as alimony ...
AND you can claim as an itemized deduction ...
mortgage payments (principal and interest) jointly owned half of the total payments half of the interest as interest expense 1 (if the home is a qualified home).
real estate taxes and home insurance held as tenants in common half of the total payments half of the real estate taxes 2 and none of the home insurance.
  held as tenants by the entirety or in joint tenancy none of the payments all of the real estate taxes and none of the home insurance.
  1. Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home.
  2. Your spouse (or former spouse) can deduct the other half of the real estate taxes.

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.

  1. A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply.
  2. A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that:
 
a. Changes the amount or period of payment, or
b. 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 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.

  • The payment is in cash.
  • The instrument does not designate the payment as not alimony.
  • 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.
  • There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
  • The payment is not treated as child support.

Each of these requirements is discussed below.

Cash payment requirement. Only cash payments, including checks and money orders, qualify as alimony. The following do not qualify as alimony.

  • Transfers of services or property (including a debt instrument of a third party or an annuity contract).
  • Execution of a debt instrument by the payer.
  • 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.

  • The payments are in lieu of payments of alimony directly to your spouse.
  • The written request states that both spouses intend the payments to be treated as alimony.
  • 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 payee.

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:

  • On the happening of a contingency relating to your child, or
  • 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:

  • Becoming employed
  • Dying
  • Leaving the household
  • Leaving school
  • Marrying, or
  • Reaching a specified age or income level

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.

  1. 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.
  2. 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 above. 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.

Recapture of Alimony

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:

  • 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 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.

  • Payments made under a temporary support order
  • 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
  • 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.

How to figure and report the recapture. Both you and your spouse can use Worksheet 1 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.

Example.

You pay your former spouse $50,000 alimony the first year, $39,000 the second year, and $28,000 the third year. You complete Worksheet 1 as illustrated above. In the third year, you report $1,500 as income on Form 1040, line 11, and your former spouse reports $1,500 as a deduction on Form 1040, line 31a.

Worksheet 1. Recapture of Alimony

Note. Do not enter less than -0- on any line.
1. Alimony paid in 2nd year 1.
2. Alimony paid in 3rd year 2.
3. Floor 3. $15,000
4. Add lines 2 and 3 4.
5. Subtract line 4 from line 1 5.
6. Alimony paid in 1st year 6.
7. Adjusted alimony paid in 2nd year (line 1 less line 5) 7.
8. Alimony paid in 3rd year 8.
9. Add lines 7 and 8 9.
10. Divide line 9 by 2 10.
11. Floor 11. $15,000
12. Add lines 10 and 11 12.
13. Subtract line 12 from line 6 13.
14. Recaptured alimony . Add lines 5 and 13 14.*
* If you deducted alimony paid, report this amount as income on Form 1040, line 11.
If you reported alimony received, deduct this amount on Form 1040, line 31a.

Worksheet 1. Recapture of Alimony-Illustrated

Note. Do not enter less than -0- on any line.
1. Alimony paid in 2nd year 1. $39,000
2. Alimony paid in 3rd year 2. $28,000
3. Floor 3. $15,000
4. Add lines 2 and 3 4. $43,000
5. Subtract line 4 from line 1 5. -0-
6. Alimony paid in 1st year 6. $50,000
7. Adjusted alimony paid in 2nd year (line 1 less line 5) 7. $39,000
8. Alimony paid in 3rd year 8. $28,000
9. Add lines 7 and 8 9. $67,000
10. Divide line 9 by 2 10. $33,500
11. Floor 11. $15,000
12. Add lines 10 and 11 12. $48,500
13. Subtract line 12 from line 6 13. $1,500
14. Recaptured alimony . Add lines 5 and 13 14.* $1,500
* If you deducted alimony paid, report this amount as income on Form 1040, line 11.
If you reported alimony received, deduct this amount on Form 1040, line 31a.

Instruments Executed Before 1985

Information on pre-1985 instruments was included in this publication through 2004. If you need the 2004 revision, please go to the IRS website at IRS.gov.

 

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Massachusetts Divorce Law - IRS Publication 504 - Alimony