Today TaxMama hears from Gary in Missouri, who tells us “I am a retired military man and the judge gave my ex-wife one half of my retirement check…actually, I lose 55%, including child support. Is any of that deductible from my taxes?”
Hi Gary,
You’re going to need to need to read your divorce settlement.
The short answer is – any part that specifically says it’s “spousal support” or “alimony” is deductible. “Child support” is not.
But what’s if the decree calls the payments “Family Support”? You’re in luck. They were always kind of a gray area. But, there was a court case just last year in San Diego, CA, where the judge ruled that family support, if it terminated at death and followed certain other guidelines that made it look like the definition of alimony in the tax code, was fully deductible as alimony. I’ve included a summary of that ruling for you to read at your leisure.
• Family Support Payments Qualify as Alimony. The Tax Court has held that a taxpayer was entitled to an alimony deduction for monthly unallocated family support payments to his exwife because there was no continuing payment liability beyond her death, but denied his deductions for court-appointed psychologists. The central issue in this case was whether the taxpayer’s family support payments satisfied Code §71(b)(1)(D) which notes that a cash payment meeting the requirements of Code §71(b)(1)(A)-(C) qualifies as alimony only if there is no liability to make such a payment after the death of the payee and there is no liability to make any payment as a substitute for such payments after the death of the payee. In finding that the taxpayer fulfilled such requirements, the court held that he was entitled to an alimony deduction for the years in question. However, the taxpayer was not allowed to take an alimony deduction for expenses related to his court-appointed psychologist. Berry v. Commissioner, T.C. Memo. 2005-91
https://www2.mnbar.org/benchandbar/2005/mj05/NoteTrendsMayJune2005.htm
And if you’re really into reading court opinions, you’re welcome to read the full case here.
https://www.ustaxcourt.gov/InOpHistoric/berryopinion.TCM.WPD.pdf
If you read the full case, you’ll see that the Court allowed him to take the full payment as alimony. That’s what’s so interesting. The Court did not require the payments to be split between child support and alimony. In the past, if only “family support” was granted without alimony being defined, it was necessary to find a way to apportion the alimony and child support.
Gary, it’s worth the few bucks to have a competent tax professional who’s experienced in divorce issues review your divorce documents to see just what part of your payments may be deducted.
Not all of us have experience with divorce. So do make sure your expert is intimately familiar with this area of the Tax Code.
You’ll get to use the maximum deduction – and avoid a lot of grief.
And remember, you can find answers to questions about divorce and all kinds of other tax issues, free. Where? Where else? At TaxMama.com
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- Summary of Tax Court Opinion :: Berry v. Commissioner, T.C. Memo. 2005-91
- Detailed Tax Court Opinion :: Berry v. Commissioner, T.C. Memo. 2005-91
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