Alimony

If you receive alimony, spousal support, or any other payments from a former spouse that are not treated as child support or part of a property settlement, you must report the payments as alimony. These payments are fully taxable as ordinary income.

If you make these payments, you can fully deduct them. You’ll have to provide the Social Security number of your spouse or former spouse.

To be treated as alimony for income and deduction purposes, all of the following conditions must apply:

• Payments must be made under a decree of divorce or legal separation or decree of support.
• Payments must be in cash.
• Payments must not be for child support. Child support is tax free to the recipient-spouse and nondeductible by the payer-spouse.
• The parties must not live in the same household.
• The payer-spouse’s obligation to make payments must end on the death of the recipient-spouse.

Break: Even though you do not work, you can fund an IRA or Roth IRA based on alimony payments you receive. Under a special tax rule, alimony is treated as earned income for purposes of contributing to an IRA/Roth IRA.