Child support and alimony: taxable, deductible, or neither

Neither side of a child support payment reaches a tax return: nobody deducts it and nobody reports it. Alimony is decided by one thing, the date the agreement was executed, and the current rule leaves it in the same position child support has always been in.

Child support, in three sentences

Child support is never deducted by the person paying it and never counted as income by the person receiving it. That holds regardless of what the decree calls the payment, or when the decree was drawn up.

One rule travels with it, and it catches anyone who falls behind. Where a single instrument sets out child support alongside alimony, and the payer sends less than the full amount owed, what arrives is credited against child support before anything else. Only a surplus, if there is one, can count as alimony. A payer who runs short for a few months loses the deductible half of the obligation first, while the half that was never deductible stays fully paid.

Alimony turns on the date

Under an agreement executed before 2019, alimony and separate maintenance are generally deducted by the spouse who pays and reported as income by the spouse who receives. The line falls at December 31, 2018.

Past that line nothing of the kind happens. A payer gets no deduction where the agreement was executed after 2018, and none either where an older agreement has since been modified and the modification states in terms that the repeal of the alimony deduction reaches that modification. On the receiving side, payments made under an agreement in either of those positions stay out of gross income. Agreements from 2019 onward are neither deductible nor taxable, on both sides of the split.

So the first move is not arithmetic. Find the execution date on the decree, and check whether anything has modified it since, before working out what belongs on anyone's return.

What counts as alimony at all

A decree can call a payment alimony and still be wrong about it for tax purposes. Seven things have to be true at once before a payment qualifies.

• You and your spouse are not filing a joint return with one another.
• The money moves as cash, which takes in checks and money orders.
• It goes to a spouse or a former spouse, or is paid for their benefit, and a divorce or separation instrument is what requires it.
• The two of you are living in separate households when it is paid. That condition bites only where a decree of divorce, or one of separate maintenance, has legally separated you.
• Nothing obliges the payer to keep paying, in cash or in anything else, once the recipient has died.
• The payment is not classed as child support, and it is not a property settlement.
• The agreement has not stipulated that the payment stays outside the recipient's gross income and earns the payer no deduction.

Miss any one of the seven and the payment is not alimony, whatever the paperwork on your desk calls it.

What is not alimony

A second list settles most of the arguments. Child support is out. So is a property settlement paid in kind, whether it comes as one lump or in installments. So is any payment that represents your spouse's own share of community property income. So is money spent maintaining property the payer owns, and so is letting the other spouse use property the payer owns. And a payment that no decree or written separation agreement obliged you to make is voluntary, which puts it outside as well.

That community property item is not academic in Texas, which is a community property state, and it is one of the reasons filing separately there is harder than it looks.

Reporting it, for pre-2019 agreements

Inside the older regime the mechanics are short. The payer takes the deduction whether or not they itemize, on Form 1040 or Form 1040-SR with Schedule 1 attached. The recipient brings the same money in as income, reported through Schedule 1 in the same way.

Each side needs a number from the other. The payer has to enter the recipient's Social Security number or ITIN, and without it the deduction can be thrown out and $50 charged on top. The recipient has to hand their own number over, at the risk of the same charge. It is a small amount hanging off a large deduction, and none of it is unavoidable.

The mistakes that cost money

Wording in a decree does not settle the question. A payment labeled alimony is not alimony unless the seven conditions hold, and that label is what people lean on when they ought to be checking the conditions.

Modifying an old agreement can push it into the current regime. Read a modification before signing it, because language expressly applying the repeal to that modification ends the deduction for everything paid afterwards.

Payments that no decree or written agreement obliged you to make are voluntary, and voluntary payments are not alimony. The reverse is worth having too: a written separation agreement counts as a divorce or separation instrument in its own right, so payments under one can qualify with no court decree behind them.

Anyone receiving pre-2019 alimony is taking in income with nothing withheld from it, which normally means quarterly estimated payments rather than an unpleasant April. And where the decree predates 1985, or the question is whether an amount deducted earlier has to be recaptured, hand it to a preparer. Publication 504 is where both of those live.