Over 50% of marriages end in divorce in the United States. Many divorce decrees include provisions for the payment of alimony. The IRS takes the position that such payments constitute a form of income and create an alimony tax deduction for the person making the payments.
According to the IRS, alimony payments are taxable to the beneficiary in the year received. In turn, the person paying the alimony can claim a deduction for the payments if the following tests are met:
1. You and your spouse or former spouse are not filing a joint return with each other,
2. You pay in cash (including checks or money orders),
3. The instrument of divorce or separation does not say that the payment is not alimony,
4. If you are legally separated under a decree of divorce or separate maintenance, you and your former spouse are not members of the same household when you make the payment,
5. You are not required to make any payments (in cash or property) after the death of your spouse or former spouse; and
6. Your payment is not treated as child support.
If you are receiving or paying alimony, you must use Form 1040 for your personal taxes. Regardless of income levels, deductions, or miscellaneous tax issues, you cannot use Form 104A or Form 1040EZ.
When preparing their tax return, the person receiving alimony will report the information on line 11 of Form 1040. That person must also provide their former spouse with their social security number or face a $50 penalty. The person paying alimony can claim the deduction on line 34a of Form 1040.
