Payments to Former Spouse Not Alimony without Designation

To be deductible alimony, payments must be made in cash under a divorce decree or separation agreement that designates the payments as alimony. In one recent case, a divorce decree required a husband to pay his former spouse $475 per month as a share of his pension from the U.S. Postal Service. He deducted the payments as alimony but the Tax Court said no.

In this case, the payments were not designated as alimony and could not be treated as such. In fact, the decree said that he was not obligated for maintenance of his former spouse.

Lesson: Even if the decree did not designate the payment as alimony, the husband could have obtained a favorable tax result if the decree had included a qualified domestic relations order (QDRO) directing the pension plan to pay a share of the monthly pension to the former spouse as a designated alternate payee. This would prevent the retiree from being taxed on the portion of the pension paid to the alternate payee.

Source: Donald A. Benzin; T.C. Summary Opinion 2009-198