When negotiating the terms of a divorce or separation, it is important to remember the impact child support, alimony, and other amounts paid will have on tax each party’s taxes. Not all payments are classified the same, and not all payments are tax free.
Child support payments in any amount are neither deductible nor taxable income for either parent.
On the other hand, alimony payments paid under a divorce or separation instrument are deductible by the payer, and the recipient must include it in income.
Taxpayers can deduct alimony paid under a divorce or separation decree, whether or not they itemize deductions on their return. Taxpayers must file Form 1040; enter the amount of alimony paid and their former spouse's Social Security number or Individual Taxpayer Identification Number.
Taxpayers should report alimony received as income on Form 1040 in the year received. Alimony is not subject to tax withholding so it may be necessary to increase the tax paid during the year to avoid a penalty. To do this, it is possible to make estimated tax payments or increase the amount of tax withheld from wages.
A final decree of divorce or separate maintenance agreement by the end of the tax year means taxpayers can’t deduct contributions made to a former spouse's traditional IRA. They can only deduct contributions made to their own traditional IRA. For more information about IRAs, see Publications 590-A and 590-B.
Notify the Social Security Administration (SSA) of any name changes after a divorce. Go to SSA.gov for more information. The name on a tax return must match SSA records. A name mismatch can cause problems in the processing of a return and may delay a refund.
For more on this topic, see Publication 504, Divorced or Separated Individuals. Get it on IRS.gov/forms at any time.