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Helton Law Firm, PLLC

Ensuring that alimony payments are tax-deductible

After a Tennessee couples divorces, one person may owe spousal support to the other. The person who receives spousal support generally must pay taxes on it, and the person who pays support can usually take a tax deduction on the payment. However, one man who tried to claim an alimony deduction on a payment that was not included as part of his and his ex-wife's divorce agreement found that this was not possible.

The man had filed for divorce from his wife in 2007, and in 2006, he had received a bonus. Before the divorce was finalized, he paid his wife a portion of the bonus, and the two signed an agreement regarding it. Later, a spousal support order did not make a mention of the bonus. When the man claimed it as a deduction, the IRS questioned the deduction. The U.S. Tax Court said that an alimony amount had to be part of a legal divorce or separation agreement in order to qualify for deduction.

There are a few other conditions that must be in place as well. The payer and the recipient must live in separate households, the separation or divorce agreement must not say the amount is nontaxable and nondeductible, and the alimony payments must end when the recipient dies.

People who are divorcing might wonder whether they will be required to pay or receive alimony. Not every divorce includes alimony payments. If the two people have a roughly equivalent income, alimony is unlikely. However, in some marriages, a person may have spent years caring for the children and household, or one person may make significantly more money than the other.

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