Gross income includes amounts received as alimony or separate maintenance payments. Amounts paid that qualify as alimony, will be deductible from gross income without itemizing by the payer. Any amounts paid that qualify as alimony will be treated as alimony unless it consists of an unallocated amount which includes child support, or is designated as a property transfer. Alimony does not have to be paid over a fixed period of time or a constant amount each period. However, front loading of payments as alimony can cause such excess to be treated as a property transfer by recapturing the excess amounts in the third year.
Alimony or separate maintenance payments defined
In general, the term means any payment in cash if 1) it is received by (or on behalf of) a spouse under a divorce or separate maintenance instrument, 2) the instrument does not designate the payment as a payment which is not includible in gross income and not allowable as a deduction, 3) the taxpayers are not members of the same household at the time the payment is made under the instrument, and 4) there is no liability to make payments after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse.
Divorce or separation instrument is 1) a decree of divorce or separate maintenance or a written instrument incident to such a decree (by a court), 2) a written separation agreement (by the parties), or 3) a decree requiring a spouse to make payments for the support or maintenance of the other spouse (temporary alimony, interlocutory decrees of divorce and payments being made pursuant to a decree pendente lite).
Payments to support children
In general, payments which are fixed by the instrument as a sum which is payable for the support of children will not be considered alimony. The amount associated with the reduction due to a contingency relating to a child will be considered child support and not alimony. Where the payment is less than the total amount specified, so much of the payment as does not exceed the sum payable for total support will be first allocated to the child support. Unallocated family support payments, incorporated by a temporary order into a divorce decree were not deductible by the husband or includible by the wife as alimony (or vice versa, of course…). The payments did not terminate on the wife’s death (Cheryl J. Miller, et al, v. Commissioner (1999) TC Memo 1999-273, 1999 RIA TC Memo 99,273). The regulations provide several examples where terminating payments are considered related to a contingency of a child that are not obvious.
Voluntary payments either before the agreement incident to the divorce is reached, or in excess of the agreement are not deductible by the payer or includible in income of the payee spouse (Reg. Sec. 1.71- 1(b)).