Are Pension Payments from my ex-husband considered Alimony, my decree does not state this income as Alimony, and it is paid to me by my ex after he pays taxes on it 1st?

[DanielV01 · Accepted solution]

It depends.  Although the divorce decree may not specifically state that they are alimony payments, they may be considered as alimony for tax purposes.  (Likewise, payments called alimony in the divorce decree may not be considered as such for tax purposes).  Here is an IRS website that details this information, to help determine if the amounts you are receiving are alimony (and thus taxable) or not:  https://www.irs.gov/taxtopics/tc452.html

[laura-vanhorn]

Thank you! This is very helpful and I appreciate your time in answering. 🙂

[jenniferhinz13]

I clicked on the link and am confused by the following statement under "alimony requirements": The divorce or separation instrument doesn't designate the payment as not alimony;
Does this mean that if the divorce decree does NOT state that the payment is alimony, then it is NOT considered alimony?

[bredehoftju]

To add to this discussion.  My husband worked for a state pension system.  He is retired and is required to pay a portion of his pension to his ex-wife.  I was under the understanding that this is not deductible--she gets the nice check tax free.  To make matters worse, we don't quality for the Covid tax relief as we make over the $198,000, but if you deduct her payments, we are under that limit.  I really don't think this is fair.

[CatinaT1]

Here is how the IRS defines Alimony:

Alimony or Separate Maintenance – In General

A payment is alimony or separate maintenance only if all the following requirements are met:

• The spouses don't file a joint return with each other;
• The payment is in cash (including checks or money orders);
• The payment is to or for a spouse or a former spouse made under a divorce or separation instrument;
• The spouses aren't members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);
• There's no liability to make the payment (in cash or property) after the death of the recipient spouse; and
• The payment isn't treated as child support or a property settlement.

Payments Not Alimony or Separate Maintenance

Not all payments under a divorce or separation instrument are alimony or separate maintenance. Alimony or separate maintenance doesn’t include:

• Child support,
• Noncash property settlements, whether in a lump-sum or installments,
• Payments that are your spouse's part of community property income,
• Payments to keep up the payer's property,
• Use of the payer's property, or
• Voluntary payments (that is, payments not required by a divorce or separation instrument).

As far as deductibility -

Alimony or separation payments paid to a spouse or former spouse under a divorce or separation agreement, such as a divorce decree, a separate maintenance decree, or a written separation agreement, may be alimony for federal tax purposes.  Alimony or separation payments are deductible if the taxpayer is the payer spouse.  Receiving spouses must include the alimony or separation payments in their income.

Beginning Jan. 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018. 

This also applies to a divorce or separation agreement executed on or before Dec. 31, 2018, and modified after December 31, 2018, as long as the modification:

• changes the terms of the alimony or separate maintenance payments; and
• states that the alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.

On the other hand, generally alimony or separate maintenance payments are deductible from the income of the payer spouse and includable in the income of the receiving spouse, if made under a divorce or separation agreement executed on or before Dec. 31, 2018, even if the agreement was modified after December 31, 2018, so long as the modification is not one described in the preceding paragraph.

[JavaJen]

This part confuses me. If divorce was in Texas than is the pension considered community property? And does this mean payer cannot deduct pension payments to former spouse and former spouse pays no tax on the income? Divorce was in 2008 but payments started to former spouse  a few years ago. 

• Payments that are your spouse's part of community property income

[ReneeM7122]

Generally, distributions from pensions will be characterized as community or separate income depending on the respective periods of participation in the pension while married (or during the registered domestic partnership) and domiciled in a community property state or in a noncommunity property state during the total period of participation in the pension. These rules may vary between states. Check your state law.

Here is a link to IRS Publication 555, Pensions

@JavaJen

[JavaJen]

Pension was earned while a Texas resident. It’s Not listed as separate in the divorce decree. Sounds like based on the link you included in your post, it’s not deductible to the payer or taxable for the payee. 

[ReneeM7122]

Yes, you are correct.  The pension is not deductible to the payer or taxable for the payee.

[JavaJen]

If ‘pension’ is from military retirement does this still apply? See this article: https://familylawyermagazine.com/articles/taxes-and-military-pensions-the-long-and-short-of-it/

[ThomasM125]

It wouldn't make any difference that the pension is from a military retirement. It's treatment as alimony is not affected by it being military retirement.