DEFINITION of 'Alimony Payment'

An alimony payment is a periodic pre-determined sum awarded to a spouse or former spouse following a separation or divorce. Alimony is an obligation to make payments for support or maintenance; an alimony payment is the actual sum paid to fulfill the obligation. A decree or court order outlines the alimony payment structure and requirements.

BREAKING DOWN 'Alimony Payment'

When a married couple becomes legally separated or divorced, a court may determine or the couple may agree to the legal obligation of one of the individuals to provide money to the other to provide the type of financial support to which he or she has become accustomed to throughout the life of the marriage. In the United States, the Internal Revenue Service permits alimony payments to be deductible by the payer, and requires the recipient to include the alimony payments as income. Child support payments are separate from alimony payments.

Changes In Alimony

The Tax Cuts and Jobs Act eliminates the tax deduction for alimony paid for divorce agreements executed after Dec. 31, 2018, although existing divorces and separations won't be affected by this. Under the new rules, alimony recipients will no longer owe federal tax on this support. These are big changes that will affect how many divorce decrees will be structured.

Instead of cash payments structured into divorce decrees starting in 2019, some advisers suggest the higher-earning partner award the spouse an IRA instead, which is in effect a tax deduction since no taxes had been paid on the amounts added to the account. The spouse who receives the account would have to pay taxes, though presumably at a lower rate. But the money can't ordinarily be taken out before age 59.5 without incurring a 10% penalty.

According to the IRS, a payment is alimony only if all the following requirements are met: The spouses don't file a joint return with each other; the payment is in cash (including checks or money orders); the payment is to or for a spouse or a former spouse made under a divorce or separation instrument; the divorce or separation instrument doesn't designate the payment as not alimony; the spouses aren't members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.); there's no liability to make the payment (in cash or property) after the death of the recipient spouse; and the payment isn't treated as child support or a property settlement.

  1. Alimony

    Alimony is court-awarded payments made to a lower-earning spouse ...
  2. IRS Publication 504

    A document published by the Internal Revenue Service that provides ...
  3. Legal Separation

    Legal separation occurs when a married couple decides to live ...
  4. Form 8857: Request For Innocent ...

    An IRS tax form used by taxpayers to request relief from a tax ...
  5. IRS Form 8379: Injured Spouse Allocation

    IRS Form 8379: Injured Spouse Allocation is a form used by a ...
  6. IRS Publication 971: Innocent Spouse ...

    A document published by the Internal Revenue Service (IRS) that ...
Related Articles
  1. Personal Finance

    How Changing Tax Laws Could Affect Divorcing Couples

    With the changes happening to income tax laws in 2018 it's even more important to understand the credits and deductions affected by divorce.
  2. Personal Finance

    7 Financial Tips for Women Preparing for Divorce

    Women need to prepare financially for divorce. Here's how.
  3. Taxes

    Divorced? 7 Tax Traps to Avoid

    Filing your taxes is complicated enough, but it can become even more challenging after a divorce.
  4. Personal Finance

    Getting Divorced: Mistakes Men Make, Mistakes Women Make

    When they get divorced, men and women make different types of mistakes. A strategic primer.
  5. Personal Finance

    5 Tips for Managing Finances After Divorce

    Divorce can be emotionally and financially devastating. Use these tips to help keep divorce from ruining your financial future.
  6. Personal Finance

    How to Achieve Financial Goals During a Divorce

    This is what needs to be considered to achieve a desired financial outcome in divorce proceedings.
  7. Personal Finance

    10 Mistakes to Avoid When Divorcing Over 50

    It is not easy growing old, especially when you decide to divorce. Learn how to avoid money trouble if you decide to divorce your spouse after age 50.
  8. Personal Finance

    Social Security and Divorce Are Unlikely Bedfellows

    If you get divorced after at least 10 years, you might get some extra Social Security benefits.
  9. Personal Finance

    The Best And Worst Times (Financially) To Get Divorced

    Divorce is rarely financially advantageous to either party. There are times, however, when it can have an even deeper impact on your personal economic situation.
  10. Personal Finance

    How Life Insurance Works in a Divorce

    When dealing with divorce, life insurance is an important issue that is often overlooked. Here is an overview of how it works in a divorce.
  1. If an individual still has his or her former spouse as the beneficiary of an IRA, ...

    Generally, divorce does not effectively change a beneficiary designation unless the divorce decree makes a stipulation to ... Read Answer >>
  2. Can a person who is retired continue to fund an IRA?

    You must have earned the income or received it as alimony for it to be considered compensation for the purposes of contributing ... Read Answer >>
Trading Center