What Constitutes Alimony for Tax Purposes

• Since the person paying alimony receives a tax benefit, the IRS has established requirements in order for a payment to be considered alimony. The spouses or former spouses may not file a joint return with each other, nor may they be members of the same household when the payments are made. Alimony must be paid in cash and the instrument must not designate payments as something other than alimony. Payments are not required to be made after the death of the recipient spouse. Lastly, the payment may not be used or treated as child support.
  
  

Tax Treatment of Alimony Generally

• Federal law specifically includes alimony as includable in gross income by the recipient. Moreover, the person who is paying the alimony may deduct alimony payments from his income taxes. It is essential that these alimony payments meet the legal requirements to be considered alimony because the recipient will likely be required to include the payment in her income, but the payor will not receive the tax deduction if all requirements are not met. Federal law also requires that alimony payments are to be substantially equal for the first three years of payments to avoid structuring other types of payments to look like alimony payments.
  
  

Foreign Alimony

• The federal tax code does not distinguish between domestically received alimony and alimony received from out of the country. Accordingly, alimony that you receive from a person who is located out of the United States must be reported as income on your tax return. The difference between this foreign alimony and domestic alimony is that depending on the payee’s circumstances, the person paying the alimony may not receive the benefit of deducting the alimony payments.
  
  

How to Declare Foreign Alimony

• To declare the receipt of foreign alimony and include it in your income, you are required to use Form 1040 and may not use Form 1040A or Form 1040EZ. It will be reported on line 11 of Form 1040 and will be added with other sources of income to achieve your total income.