Distinguishing Alimony from Child Support

The IRS will treat a payment as child support, rather than tax-deductible alimony, to the extent that it could be reduced or ended when some future event happens relating to your child, such as the child's death, marriage, graduation from high school or college, getting a job, reaching a specified age or income level, etc.

Even if the divorce decree is drafted to avoid mentioning any child-related events, the payment will be presumed to be child support if it will be reduced or ended within six months before or after your child reaches age 18 or 21, or, if you have more than one child, if the payments are to be reduced on two or more occasions, and each occasion takes place not more than one year before or after a different child reaches a certain age. The "certain age" must be between 18 and 24, and must be the same for each child.

Example Michael is to pay Lisa, his former wife, $2,000 per month in alimony. However, the payments are to be reduced to $1,500 per month on January 1, 2013, and to $1,000 per month on January 1, 2016. When the first reduction is scheduled to occur, the couple's first child, Michael Jr., will be 20 years, 5 months, and one day old. The second reduction will occur when their second child, Pamela, is 22 years, 3 months, and 9 days old. Because each reduction will occur within 1 year of a child reaching the age 21 years and 4 months, and the total reductions are equal to $1,000, $1,000 of each "alimony" payment is considered to be nondeductible child support for tax purposes.

The rules discussed above apply to alimony in most states. However, in community property states, there are some differences in the way alimony is treated if paid before the divorce is final (e.g., under a temporary order). If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you'll want to check with your lawyer or tax advisor about the tax treatment of temporary alimony you pay or receive.

© 2024 Wolters Kluwer. All Rights Reserved.