Tax Advantages of Alimony
Key Points
  • If alimony is over weighted up front (for example: heavier payments for the 1st 2 years) to offset property or other assets in the settlement, the IRS may require a portion of it to be taxable when the payor files his or her tax return.
  • Spousal support and child support are taxed differently.

The tax advantages of using alimony can be so powerful that people going through divorce are tempted to label some payments as alimony when they are really child support or property settlement. The government's response is in the form of two tests:

  • Excess Alimony (front-end loading): Congress recognized the temptation to characterize property settlements as alimony, so the 1984 Tax Reform Act contains provisions calling for the recapture of "excess" alimony (that looks too much like a property settlement). Specifically, the rules provide that if alimony is excessively "front-loaded" (concentrated too much in the first two years of payments), the payor spouse must "recapture" it. (That means the payor spouse must include it in his or her gross income). Divorcing spouses must remember what are called I.R.S. recapture rules. Recapture applies to alimony payments when the alimony paid decreases by more than $15,000 annually within a three-year period after a divorce. If in a three-year period a taxpayer's alimony decreases by more than $15,000 from the amount of the proceeding year, the I.R.S. regards the alimony payments as property distribution and recaptures the obligor's income retroactively. In this, the I.R.S. recovers the tax benefit of a deduction or a credit taken by a taxpayer and disallows the deduction. Recapture prevents a divorcing couple from dividing their property and calling the distribution alimony.
  • Alimony fixed as child support: Alimony cannot be called child support. When the divorce decree or separation agreement identifies a specific amount of continuing support as child support, the amount so designated cannot be treated as alimony. Payments can be characterized as child support even though they are for the support of an adult child. It cannot be changed based on something happening to the child. A payment will be treated as child support to the extent it is subject to reduction on the occurrence of a specified contingency relating to the child getting a job or going to college (Or a child's marrying, dying, leaving home, leaving school, or reaching a certain income. It cannot be changed based on something associated with a change to the child.)

Suggested Reading
The Spousal Support Handbook The Spousal Support Handbook
Spousal support is one of many issues that is often difficult for spouses to agree upon. Before negotiating and even signing an agreement regarding spousal support it is very important that you understand your rights and the repercussions of any actions taken.

Download Now

Recent Related Blog Posts
    All Spousal Support Blog Posts

Related Article Archives
Spousal Support
Tax Aspects
    All Article Archives

Related Categories
Bankruptcy & Divorce
Divorce Financial Planning
Divorce Laws
Insurance & Divorce
Women's & Mother's Rights
    All Categories
Related Forums
Financial Aspects
Men's Rights
Spousal Support
Tax Aspects
Women's Rights
    All Forums

Resources & Tools

Bookstore Promotion Discount

Start Your Divorce Online Start Your Divorce
Several Options to Get Started Today.
Divorce Tools Online Divorce Tools
Keeping it Simple to Get the Job Done.
Divorce Downloads Download Center
Instantly Download Books, Guides & Forms.
Divorce and Custody Books Discount Books
Over 100 of the Best Divorce & Custody Books.
Negotiate Online Negotiate Online
Settle your Divorce and Save.
Custody and Support Tracking Custody Scheduling
Make Sure You Document Everything.
CALCULATION OF ALIMONY – In most jurisdictions, judges exercise broad discretion in awarding alimony, its amount and duration. The Uniform Marriage and Divorce Act, on which many states' spousal support statutes are based, recommends that courts consider the following factors in making decisions about alimony awards: the age, physical condition, emotional state, and financial condition of the former spouse; the length of time the recipient needs education or training to become self-sufficient; the couple's standard of living; the length of the marriage; and the ability of the payor spouse to support the recipient and support himself or herself.
Start Divorce

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:


Featured Book The Spousal Support Handbook

The Spousal Support Handbook

The Spousal Support Handbook


Featured Download The Effect of Artificially High and Low Marital Standards of Living on Spousal Support Awards

The Effect of Artificially High and Low Marital Standards of Living on Spousal Support Awards

The Effect of Artificially High and Low Marital Standards of Living on Spousal Support Awards

Start Reaching Potential Clients Through Divorce Source. Learn More

Guarantee Official PayPal Seal Facebook Twitter Versign Secure Site