Part Three: The Payment is made under a divorce or a separation instrument
Alimony or separate maintenance payments are included in the gross income of the payee spouse and allowed as deduction from the gross income of the payor spouse.
A payment under a divorce or separation agreement executed or modified after 1984 qualifies as alimony if:
- A divorce or separation instrument is a decree of divorce or separate maintenance, or a written instrument incident to the decree; a written separation agreement; or a decree requiring a spouse to make payments for the support or maintenance of the other spouse, including a temporary support order.
- Voluntary Payments: These are not deductible by the payor-spouse. A voluntary payment is one that the payor-spouse has no legal obligation to make under a decree or instrument of divorce or separation. A separation agreement is the best assurance that alimony payments will be deductible by the payor and not viewed as voluntary. Absent the temporary alimony order or a separation agreement, these payments are viewed as voluntary and non-deductible.
- Written Separation agreement: For a writing to qualify as a written separation agreement for purposes of alimony, it must represent an “agreement”. It won’t qualify if it indicates that parties are in dispute or have otherwise put off making a decision on the amount of support payments.
- Amended Agreements: Amended agreements are effective for federal income tax purposes only for future payments. Amendments are given retroactive effect for tax purposes only if they correct mistakes in decrees or separation agreements and the purpose of the correction is to reflect the parties’ intent in the original decree or agreement. An amendment is not given retroactive effect for tax purposes if it attempts to change the rights of the parties or the legal status of the payments under the original decree or separation agreement.