Deducting alimony

Dear Tax Talk,
Can the judge in a divorce case declare that alimony is payable to the ex-spouse, but is not taxable to her? -- David

Dear David,
Since you're in divorce court, you probably have come to realize that anything unfair is possible.

For alimony to be deductible, the divorce decree must provide consistent treatment. If the judge decrees that the payments are not income to the spouse, then you would not receive a deduction for the payments even though the payments otherwise qualify as alimony under the tax rules.

Generally, if alimony is to be paid to a nonworking former spouse, it is beneficial to both parties that the payments qualify as alimony.

The benefit is that the paying spouse reduces his or her taxes at a marginal tax rate higher than what the receiving spouse will pay in taxes. Ex-spouses generally will agree to a higher payment to split some of the tax benefit.

If the former spouse will work, then the tax benefit is somewhat reduced, but at least should be evaluated before allowing the judge to make an arbitrary ruling. Internal Revenue Service Publication 504, Divorced or Separated Individuals, provides additional information for divorced taxpayers.