Can a spouse deduct any alimony paid on a tax return?
Yes. Alimony is income to a payee and a deduction to the payor, but it must be clear and spelled out in the separation instrument what constitutes alimony. The IRS taxes all income, from whatever source.
Difficulties may arise when one spouse wants payment to be considered alimony and the other wants it to be considered a tax-free property distribution. For payments to be considered alimony, however, seven general conditions described above must be met. To summarize, payments must be made in cash, check or money order and must be given tax treatment by both the payor and the recipient, each of whom must file separate returns; the payments must stop at the payor’s death; the couple may not reside together.
Transfer of services or property is not considered alimony. Alimony agreements must be part of a written court order and separation agreement. In the absence of an agreement, one party may not unilaterally begin paying the other alimony (and then claiming it as a tax deduction).
No portion of the alimony may be considered child support. If alimony is reduced six months on either side of the date a dependent child reaches 18, 21, or the age of majority, the amount of the reduction is considered child support, not alimony.