Tax Brake with Robert G. Nath, Esq.

Remember that “alimony” is taxable to the recipient and deductible by the payer. Child support, or any payment on behalf of the child, is not alimony. To qualify as alimony, a payment must meet five requirements: (1) the payment must be in cash (or check), (2) the payment must be received by “or on behalf of” a spouse, (3) the divorce or separation agreement must not designate the payment as non-alimony, (4) payee and spouse are not in the same household, and (5) the liability to pay ends with the death of the payee spouse.

In the court case, various payments qualified as alimony that were “on behalf of” the payee spouse. Examples are parts of a mortgage (for which the payee spouse was liable), attorney fees, real estate taxes, auto insurance, house insurance. Other parts of a mortgage were not “alimony” because the payee spouse was not personally liable for that mortgage. This was so even though the payee spouse would have suffered if the mortgage were foreclosed on.

The court also noted that state law plays an important part here. State law determines what the property rights are between the spouses. Federal tax law uses that state law as a base, then federal tax law dictates the tax result.

The case is important in defining the reach of “alimony” and in noting that some payments, though not specifically designated as alimony, can still qualify for that tax treatment.

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