Tax Consequence of Totally Voluntary Alimony Payments

An intriguing question that doesn’t come up too often.

Husband and Wife divorce.

Husband agrees to pay Wife alimony as part of their divorce settlement.

Such alimony is deductible by Husband on his income taxes and includible by Wife on her income taxes.

Now, after the divorce is finalized, Husband and Wife agree that Husband will pay Wife some additional spousal support. It isn’t entirely clear whether this would happen just once, or each and every month.

Does this additional support receive the same tax treatment?

Based on these facts, no.

For spousal support to be deductible by the paying spouse and includible by the receiving spouse, that spousal support must be mandated by a settlement agreement and/or court order.

Of course, if Husband is willing to commit to paying the additional support over time, Husband and Wife can formally modify their divorce settlement.

If they did so, then the additional spousal support should be deductible by the paying spouse and includible by the receiving spouse.

Failing that, the additional alimony is deemed to be a gift for tax purposes.

Please note that any U.S. federal tax advice contained here is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this blog.

Read more in this Wall Street Journal piece: Ask the taxgirl: Voluntary Spousal Support