Alimony payments are deductible by the payer and taxable to the payee. To qualify as alimony, all of the following criteria must be met:
- Payments must be in cash (includes checks, money orders, bank transfers and garnishments)
- Payments must be required by a decree
- Divorce agreement may not designate the payment as “not alimony”
- Spouses may not be members of same household
- Payment may not be treated as child support
- Payer’s liability to make payments must cease upon death of the recipient
- Parties may not file a joint return
The payor spouse cannot deduct payments made before the alimony commencement date specified in the divorce decree. Such payments are considered to be voluntary payments that are not deductible alimony.
Other payments that do not qualify as alimony include:
- Child support
- Noncash property settlements
- Payments that are the spouse’s part of community property income
- Payments for use of property
- Payments to keep up the payer’s property
If a spouse is obligated to pay both alimony and child support under a decree, but pays less than the total monthly amount due, the payment made is first applied to satisfy the child support obligation. Therefore, the child support obligation must be met before any amount of alimony is deductible.