Reminders
Relief from joint liability. In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint tax return. For more information, see Relief from joint liability under Married Filing Jointly.
Social security numbers for dependents. You must include the taxpayer identification number (generally the social security number) of every person for whom you claim an exemption. See Exemptions for Dependents under Exemptions, later.
Individual taxpayer identification number (ITIN). The IRS will issue an ITIN to a nonresident or resident alien who does not have and is not eligible to get a social security number (SSN). To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. It usually takes about 4 to 6 weeks to get an ITIN. The ITIN is entered wherever an SSN is requested on a tax return. If you are required to include another person's SSN on your return and that person does not have and cannot get an SSN, enter that person's ITIN.
Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service. You can use Form 8822, Change of Address. Mail it to the Internal Revenue Service Center for your old address. (Addresses for the Service Centers are on the back of the form.)
Change of name. If you change your name, be sure to notify the Social Security Administration using Form SS-5, Application for a Social Security Card.
Change of withholding. If you have been claiming a withholding exemption for your spouse, and you divorce or legally separate, you must give your employer a new Form W-4, Employee's Withholding Allowance Certificate, within 10 days after the divorce or separation showing the correct number of exemptions.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
Introduction
This publication explains tax rules that apply if you are divorced or separated from your spouse. It covers general filing information and can help you choose your filing status. It also can help you decide which exemptions you are entitled to claim, including exemptions for dependents.
The publication also discusses payments and transfers of property that often occur as a result of divorce and how you must treat them on your tax return. Examples include alimony, child support, other court-ordered payments, property settlements, and transfers of individual retirement arrangements. In addition, this publication also explains deductions allowed for some of the costs of obtaining a divorce and how to handle tax withholding and estimated tax payments.
The last part of the publication explains special rules that may apply to persons who live in community property states.
Useful Items - You may want to see:
Publications
- 501 Exemptions, Standard Deduction, and Filing Information
- 544 Sales and Other Dispositions of Assets
- 555 Community Property
- 590 Individual Retirement Arrangements (IRAs)
- 971 Innocent Spouse Relief
Form (and Instructions)
- 8332
Release of Claim to Exemption for Child of Divorced or Separated Parents - 8379
Injured Spouse Allocation - 8857
Request for Innocent Spouse Relief
See How To Get Tax Help near the end of this publication for information about getting publications and forms.
Filing Status
Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. It may also be used in determining whether you can claim certain other deductions and credits. The filing status you can choose depends partly on your marital status on the last day of your tax year.
Marital status
If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). If you are married, your filing status is either married filing a joint return or married filing a separate return. For information about the single and qualifying widow(er) filing statuses, see Publication 501. For federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife.
Unmarried persons
You are unmarried for the whole year if either of the following applies.
- You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. You must follow your state law to determine if you are divorced or legally separated. Exception. If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals.
- You have obtained a decree of annulment, which holds that no valid marriage ever existed. You must file amended returns (Form 1040X, Amended U.S. Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. The statute of limitations generally does not end until 3 years after the due date of your original return. On the amended return you will change your filing status to single, or if you meet certain requirements, head of household.
Married persons
You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. An interlocutory decree is not a final decree.
Exception
If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. See Head of Household, later.
Married Filing Jointly
If you are married, you and your spouse can choose to file a joint return. If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. You can file a joint return even if one of you had no income or deductions.
If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns (using the filing status of married filing separately) to see which gives you the lower tax.Nonresident alien
To file a joint return, at least one of you must be a U.S. citizen or resident alien at the end of the tax year. If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. This means that your combined worldwide incomes are subject to U.S. income tax. These rules are explained in Publication 519, U.S. Tax Guide for Aliens.
Signing a joint return
Both you and your spouse generally must sign the return, or it will not be considered a joint return.
Joint and individual liability
Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse.
Divorced taxpayers
If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns.
Relief from joint liability
In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. You can ask for relief no matter how small the liability. There are three types of relief available.
- Innocent spouse relief, which applies to all joint filers.
- Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date on which election of this relief is filed.
- Equitable relief, which applies to all joint filers who do not qualify for innocent spouse relief or separation of liability.
Injured spouse
You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount. To be considered an injured spouse, you must:
- Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and
- Not be legally obligated to pay the past-due amount.
Note.
If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2) above. For more information, see Publication 555, Community Property.
Refunds that involve community property states must be divided according to local law. If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund is generally used to pay those debts.If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. Follow the instructions for the form. If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. If you filed your joint return and your joint refund was offset, file Form 8379 by itself. When filed after offset, it can take up to 8 weeks to receive your refund. Do not attach the previously filed tax return, but do include copies of all Forms W-2 and W-2G for both spouses and any Forms 1099 that show income tax withheld. An injured spouse claim is different from an innocent spouse relief request. An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. For information on innocent spouses, see Relief from joint liability , earlier.
Married Filing Separately
If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. You can file a separate return even if only one of you had income. For information on exemptions you can claim on your separate return, see Exemptions, later.
Community or separate income
If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. For more information, see Community Income under Community Property, later.
Separate liability
If you and your spouse file separately, you each are responsible only for the tax due on your own return.
Itemized deductions
If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions.
Table 1. Itemized Deductions on Separate Returns
This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. Caution: If you live in a community property state, these rules do not apply. See Community Property.
| IF you paid ... | AND you ... | THEN you can deduct on your separate federal return ... | ||
| medical expenses | paid with funds deposited in a joint checking account in which you and your spouse have an equal interest | half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. | ||
| state income tax | file a separate state income tax return | the state income tax you alone paid during the year. | ||
| file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax | the state income tax you alone paid during the year. | |||
| file a joint state income tax return and you are liable for only your own share of state income tax | the smaller of:
| |||
| property tax | paid the tax on property held as tenants by the entirety | the property tax you alone paid. | ||
| mortgage interest | paid the interest on a qualified home held as tenants by the entirety | the mortgage interest you alone paid. | ||
| casualty loss | have a casualty loss on a home you own as tenants by the entirety | half of the loss, subject to the deduction limits. Neither spouse may report the total casualty loss. |
Dividing itemized deductions
You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. See Table 1.
Separate returns may give you a higher tax
Some married couples file separate returns because each wants to be responsible only for his or her own tax. There is no joint liability. But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. This is because special rules apply if you file a separate return. These rules include the following items.
- Your tax rates will increase at income levels that are lower than those for a joint return filer.
- Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer.
- You cannot take the credit for child and dependent care expenses in most cases.
- You cannot take the earned income credit.
- You cannot take the exclusion or credit for adoption expenses in most instances.
- You cannot take the credit for higher education expenses (Hope and lifetime learning credits), the deduction for student loan interest, or the deduction for tuition and qualified related expenses.
- You cannot exclude the interest from qualified savings bonds that you used for higher education expenses.
- If you lived with your spouse at any time during the tax year:
- You cannot claim the credit for the elderly or the disabled,
- You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
- You cannot roll over amounts from a traditional IRA into a Roth IRA.
- Your income limits that reduce the child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions will be half of the limits allowed a joint return filer.
- Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
- Your basic standard deduction, if allowable, is half of that allowed a joint return filer. See Itemized deductions, earlier.
Joint return after separate returns
If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return any time within 3 years from the due date (not including extensions) of the separate return or returns. This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. Use Form 1040X to change your filing status.
Separate returns after joint return
After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return.
Exception
A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. The personal representative has one year from the due date (including extensions) of the joint return to make the change.
Head of Household
Filing as head of household has the following advantages.
- You can claim the standard deduction even if your spouse files a separate return and itemizes deductions.
- Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately.
- Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately.
- You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately.
- Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the amount you can claim for exemptions will be higher than the income limits if you claim a filing status of married filing separately.
Requirements
You may be able to file as head of household if you meet all the following requirements.
- You are unmarried or “considered unmarried” on the last day of the year.
- You paid more than half the cost of keeping up a home for the year.
- A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent, later, under Qualifying person.
Considered unmarried
You are considered unmarried on the last day of the tax year if you meet all the following tests.
- You file a separate return. A separate return includes a return claiming married filing separately, single, or head of household filing status.
- You paid more than half the cost of keeping up your home for the tax year.
- Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences, later.
- Your home was the main home of your child, stepchild, or foster child for more than half the year. (See Qualifying person, on this page, for rules applying to a child's birth, death, or temporary absence during the year.)
- You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents under Exemptions for Dependents. The general rules for claiming an exemption for a dependent are shown later in Table 3.
Nonresident alien spouse
If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other requirements to file as head of household.
Keeping up a home
You are keeping up a home only if you pay more than half the cost of its upkeep for the year. This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. This does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household.
Qualifying person
Table 2 shows who can be a qualifying person. Any person not described in Table 2 is not a qualifying person. Generally, the qualifying person must live with you for more than half of the year.
Table 2. Who Is a Qualifying Person Qualifying You To File as Head of Household? 1
Caution. See the text of this publication for the other requirements you must meet to claim head of household filing status.
| IF the person is your ... | AND ... | THEN that person is ... |
| qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) 2 | he or she is single | a qualifying person, whether or not you can claim an exemption for the person. |
| he or she is married and you can claim an exemption for him or her | a qualifying person. | |
| he or she is married and you cannot claim an exemption for him or her | not a qualifying person. 3 | |
| qualifying relative 4 who is your father or mother | you can claim an exemption for him or her 5 | a qualifying person. 6 |
| you cannot claim an exemption for him or her | not a qualifying person. | |
| qualifying relative 4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) | he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her 5 | a qualifying person. |
| he or she did not live with you more than half the year | not a qualifying person. | |
| he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household | not a qualifying person. | |
| you cannot claim an exemption for him or her | not a qualifying person. |
| 1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. |
| 2 See Table 3, later, for the tests that must be met to be a qualifying child. Note. If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents under Exemptions for Dependents, later. If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. |
| 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. |
| 4See Table 3, later, for the tests that must be met to be a qualifying relative. |
| 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. See Multiple Support Agreement in Publication 501. |
| 6 See Special rule for parent for an additional requirement. |
Special rule for parent
If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. However, you must be able to claim an exemption for your father or mother. Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly.
Death or birth
You may be eligible to file as head of household if the individual who qualifies you for this filing status is born or dies during the year. You must have provided more than half of the cost of keeping up a home that was the individual's main home for more than half of the year, or, if less, the period during which the individual lived.
Example —
You are unmarried. Your mother, for whom you can claim an exemption, lived in an apartment by herself. She died on September 2. The cost of the upkeep of her apartment for the year until her death was $6,000. You paid $4,000 and your brother paid $2,000. Your brother made no other payments towards your mother's support. Your mother had no income. Because you paid more than half of the cost of keeping up your mother's apartment from January 1 until her death, and you can claim an exemption for her, you can file as a head of household.
Temporary absences
You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. It must be reasonable to assume that the absent person will return to the home after the temporary absence. You must continue to keep up the home during the absence.
Kidnapped child
You may be eligible to file as head of household, even if the child who is your qualifying person has been kidnapped. You can claim head of household filing status if all the following statements are true.
- The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
- In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping.
- You would have qualified for head of household filing status if the child had not been kidnapped.
- The year there is a determination that the child is dead, or
- The year the child would have reached age 18.
More information
For more information on filing as head of household, see Publication 501.
Exemptions
Generally, you can deduct $3,400 for each exemption you claim in 2007. However, if your adjusted gross income is more than $117,300 see Phaseout of Exemptions, later.
There are two types of exemptions: personal exemptions and exemptions for dependents. If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return.
Personal Exemptions
You can claim your own exemption unless someone else can claim it. If you are married, you may be able to take an exemption for your spouse. These are called personal exemptions.
Exemption for Your Spouse
Your spouse is never considered your dependent. You may be able to take an exemption for your spouse only because you are married.
Joint return
On a joint return, you can claim one exemption for yourself and one for your spouse. If your spouse had any gross income, you can claim his or her exemption only if you file a joint return.
Separate return
If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption.
Alimony paid
If you paid alimony to your spouse, you cannot take an exemption for your spouse. This is because alimony is gross income to the spouse who received it.
Divorced or separated spouse
If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former spouse's exemption. This rule applies even if you provided all of your former spouse's support.
Exemptions for Dependents
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.
The term “dependent” means:
- A qualifying child, or
- A qualifying relative.
Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. For detailed information, see Publication 501.
Table 3. Overview of the Rules for Claiming an Exemption for a Dependent
Caution. This table is only an overview of the rules. For details, see Publication 501.
| • | You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. | ||
| • | You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. | ||
| • | You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico, for some part of the year. 1 | ||
| • | You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. | ||
| Tests To Be a Qualifying Child | Tests To Be a Qualifying Relative | ||
| 1. 2. 3. 4. 5. | The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student, or (c) any age if permanently and totally disabled. The child must have lived with you for more than half of the year. 2 The child must not have provided more than half of his or her own support for the year. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child. (See Special test for qualifying child of more than one person.) | 1. 2. 3. 4. | The person cannot be your qualifying child or the qualifying child of anyone else. The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you, in Publication 501, or (b) must live with you all year as a member of your household (and your relationship must not violate local law). 2 The person's gross income for the year must be less than $3,400. 3 You must provide more than half of the person's total support for the year. 4 |
| 1 Exception exists for certain adopted children. |
| 2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents, and kidnapped children. |
| 3 Exception exists for persons who are disabled and have income from a sheltered workshop. |
| 4 Exceptions exist for multiple support agreements, children of divorced or separated parents, and kidnapped children. See Publication 501. |
Children of Divorced or Separated Parents
A dependent is either a qualifying child or a qualifying relative. In most cases, because of the residency test (see item (3) under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents will qualify as a dependent of the custodial parent under the rules for a qualifying child. However, the noncustodial parent may be able to claim the exemption for the child if the special rule (discussed next) applies.
Special rule for divorced or separated parents
A child will be treated as the qualifying child or qualifying relative of his or her noncustodial parent if all of the following apply.
- The parents:
- Are divorced or legally separated under a decree of divorce or separate maintenance,
- Are separated under a written separation agreement, or
- Lived apart at all times during the last 6 months of the year.
- The child received over half of his or her support for the year from the parents.
- The child is in the custody of one or both parents for more than half of the year.
- Either of the following applies.
- The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement made after 1984, later.)
- A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2007 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2007. See Child support under pre-1985 agreement, later.
Custodial parent and noncustodial parent
The custodial parent is the parent with whom the child lived for the greater part of the year. The other parent is the noncustodial parent. If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater part of the rest of the year.
Example —
Under the terms of your divorce, your child lived with you for 10 months of the year. The child lived with your former spouse for the other 2 months. You are considered the custodial parent.
Written declaration
The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. The noncustodial parent must attach the form or statement to his or her tax return. The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. If the exemption is released for more than 1 year, the original release must be attached to the return of the noncustodial parent for the first year, and a copy must be attached for each later year.
Divorce decree or separation agreement made after 1984
If the divorce decree or separation agreement went into effect after 1984, the noncustodial parent can attach certain pages from the decree or agreement instead of Form 8332. To be able to do this, the decree or agreement must state all three of the following.
- The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
- The custodial parent will not claim the child as a dependent for the year.
- The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent.
- The cover page (write the other parent's social security number on this page).
- The pages that include all of the information identified in items (1) through (3) above.
- The signature page with the other parent's signature and the date of the agreement.
Remarried parent
If you remarry, the support provided by your new spouse is treated as provided by you. Child support under pre-1985 agreement. All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support.
Example —
Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support.
Parents who never married
The special rule for divorced or separated parents also applies to parents who never married.
Special support rules for qualifying relative
The tests that must be met for treating a child as a qualifying relative include the support test (see item (4) listed under Tests To Be a Qualifying Relative in Table 3). The following special rules apply for determining whether the support test is met.
Alimony
Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent.
Remarried parent
If you remarry, the support provided by your new spouse is treated as provided by you.
Special test for qualifying child of more than one person
Sometimes, a child meets the relationship, age, residency, and support tests to be a qualifying child of more than one person. (For a description of these tests, see list items (1) through (4) under Tests To Be a Qualifying Child in Table 3.) Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child. To meet this special test, you must be the person who can treat the child as a qualifying child. If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents described earlier, see Applying this special test under the special rule for divorced or separated parents , later. If you and another person have the same qualifying child, you and the other person(s) can decide which of you will treat the child as a qualifying child. That person can take all of the following tax benefits (provided the person is eligible for each benefit) based on the qualifying child.
- The exemption for the child.
- The child tax credits.
- Head of household filing status.
- The credit for child and dependent care expenses.
- The exclusion from income for dependent care benefits.
- The earned income credit.
Table 4. When More Than One Person Files a Return Claiming the Same Qualifying Child (Tie-Breaker Rule)
| IF more than one person files a return claiming the same qualifying child and ... | THEN the child will be treated as the qualifying child of the ... |
| only one of the persons is the child's parent, | parent. |
| two of the persons are the child's parents and they do not file a joint return together, | parent with whom the child lived for the longer period of time during the year. |
| two of the persons are the child's parents, they do not file a joint return together, and the child lived with each parent the same amount of time during the year, | parent with the higher adjusted gross income (AGI). |
| none of the persons are the child's parent, | person with the highest AGI. |
Example —
You, your husband, and your 10-year-old son lived together until August 1, 2007, when your husband moved out of the household. In August and September, your son lived with you. For the rest of the year, your son lived with your husband. Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, and support tests for both of you. At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement and you and he did not live apart for the last 6 months of the year, so the special rule for divorced or separated parents does not apply.
You and your husband will file separate returns. Your husband agrees to let you treat your son as a qualifying child. This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. As a result, your filing status is married filing separately, so you cannot claim the earned income credit or the credit for child and dependent care expenses.
Example —
The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. In this case, only your husband will be allowed to treat your son as a qualifying child. This is because, during 2007, the boy lived with him longer than with you. If you claimed an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion for dependent care benefits, or the earned income credit for your son, the IRS will disallow your claim to all these tax benefits. In addition, because you and your husband did not live apart for the last 6 months of the year, your husband cannot claim head of household filing status. As a result, his filing status is married filing separately, so he cannot claim the earned income credit or the credit for child and dependent care expenses.
Applying this special test under the special rule for divorced or separated parents
If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. However, the noncustodial parent cannot claim the child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Only the custodial parent (or other eligible taxpayer) can claim the child as a qualifying child for these four tax benefits.
Phaseout of Exemptions
The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. These levels are as follows:
| AGI Level | |||
| That Reduces | |||
| Filing Status | Exemption Amount | ||
| Married filing separately | $117,300 | ||
| Single | 156,400 | ||
| Head of household | 195,500 | ||
| Married filing jointly | 234,600 | ||
| Qualifying widow(er) | 234,600 | ||
You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. However, you can lose no more than 2/3 of the dollar amount of your exemptions. In other words, each exemption cannot be reduced to less than $1,133.
If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet, found in the instructions for Form 1040, 1040A, or Form 1040NR to figure the amount of your deduction for exemptions.
Alimony
Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument.
Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony.
To be alimony, a payment must meet certain requirements. Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. The requirements that apply to payments under post-1984 instruments are discussed later.
Spouse or former spouse
Unless otherwise stated, the term “spouse” includes former spouse.
Divorce or separation instrument
The term “divorce or separation instrument” means:
- A decree of divorce or separate maintenance or a written instrument incident to that decree,
- A written separation agreement, or
- A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).
Invalid decree
Payments under a divorce decree can be alimony even if the decree's validity is in question. A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid.
Amended instrument
An amendment to a divorce decree may change the nature of your payments. Amendments are not ordinarily retroactive for federal tax purposes. However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes.
Example —
A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. This change also is effective retroactively for federal tax purposes.
Example —
Your original divorce decree did not fix any part of the payment as child support. To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. The amended order is effective retroactively for federal tax purposes.
Deducting alimony paid
You can deduct alimony you paid, whether or not you itemize deductions on your return. You must file Form 1040. You cannot use Form 1040A, Form 1040EZ, or Form 1040NR.
Enter the amount of alimony you paid on Form 1040, line 31a. In the space provided on line 31b, enter your spouse's social security number.
If you paid alimony to more than one person, enter the social security number of one of the recipients. Show the social security number and amount paid to each other recipient on an attached statement. Enter your total payments on line 31a.
If you do not provide your spouse's social security number, you may have to pay a $50 penalty and your deduction may be disallowed.Reporting alimony received
Report alimony as income you received on Form 1040, line 11 or on Form 1040NR, line 85. You cannot use Form 1040A or Form 1040EZ. You must give the person who paid the alimony your social security number. If you do not, you may have to pay a $50 penalty.
Withholding on nonresident aliens
If you are a U.S. citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. However, many tax treaties provide for an exemption from withholding for alimony payments. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
General Rules
The following rules apply to alimony regardless of when the divorce or separation instrument was executed.
Payments not alimony
Not all payments under a divorce or separation instrument are alimony. Alimony does not include:
- Child support,
- Noncash property settlements,
- Payments that are your spouse's part of community income, as explained later under Community Property,
- Payments to keep up the payer's property, or
- Use of the payer's property.
Example —
Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. Neither is the value of your spouse's use of the home.
If they otherwise qualify, you can deduct the payments for utilities as alimony. Your spouse must report them as income. If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. However, see Example 2 under Payments to a third party, later, if your spouse owned the home, and Table 5, later, if you owned the home jointly with your spouse.
Child support
To determine whether a payment is child support, see the discussion under Instruments Executed After 1984, later. If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 on the IRS website at www.irs.gov.
Underpayment
If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony.
Example —
Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. If you pay only $3,600 during the year, $2,400 is child support. You can deduct only $1,200 ($3,600 - $2,400) as alimony and your former spouse must report $1,200 as alimony received.
Payments to a third party
Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc.), taxes, tuition, etc. The payments are treated as received by your spouse and then paid to the third party.
Example —
Under your divorce decree, you must pay your former spouse's medical and dental expenses. If the payments otherwise qualify, you can deduct them as alimony on your return. Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses.
Example —
Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. However, see the first example under Payments not alimony, earlier, if you owned the home, and Table 5, later, if you owned the home jointly with your spouse.
Life insurance premiums
Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Payments for jointly-owned home. If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony. See Table 5. However, see the first example under Payments not alimony, earlier, if you owned the home, and Example 2 under Payments to a third party, earlier, if your spouse owned the home.
Table 5. Expenses for a Jointly-Owned Home
Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction.
| IF you must pay all of the ... | AND your home is ... | THEN you can deduct and your spouse (or former spouse) must include as alimony ... | AND you can claim as an itemized deduction ... |
| mortgage payments (principal and interest) | jointly owned | half of the total payments | half of the interest as interest expense (if the home is a qualified home). 1 |
| real estate taxes and home insurance | held as tenants in common | half of the total payments | half of the real estate taxes 2 and none of the home insurance. |
| held as tenants by the entirety or in joint tenancy | none of the payments | all of the real estate taxes and none of the home insurance. |
| 1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home. 2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. |
Instruments Executed After 1984
The following rules for alimony apply to payments under divorce or separation instruments executed after 1984.
Exception for instruments executed before 1985
There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985.
- A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply.
- A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that:
- Changes the amount or period of payment, or
- Adds or deletes any contingency or condition.
Example —
In November 1984, you and your former spouse executed a written separation agreement. In February 1985, a decree of divorce was substituted for the written separation agreement. The decree of divorce did not change the terms for the alimony you pay your former spouse. The decree of divorce is treated as executed before 1985. Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984.
Example —
Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. In this example, the decree of divorce is not treated as executed before 1985. The alimony payments are subject to the rules for payments under instruments executed after 1984.
Alimony Requirements
A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met.
- The payment is in cash.
- The instrument does not designate the payment as not alimony.
- The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
- There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
- The payment is not treated as child support.
Each of these requirements is discussed below.
Cash payment requirement
Only cash payments, including checks and money orders, qualify as alimony. The following do not qualify as alimony.
- Transfers of services or property (including a debt instrument of a third party or an annuity contract).
- Execution of a debt instrument by the payer.
- The use of the payer's property.
Payments to a third party
Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. See Payments to a third party under General Rules, earlier. Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met.
- The payments are in lieu of payments of alimony directly to your spouse.
- The written request states that both spouses intend the payments to be treated as alimony.
- You receive the written request from your spouse before you file your return for the year you made the payments.
Payments designated as not alimony
You and your spouse can designate that otherwise qualifying payments are not alimony. You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. The copy must be attached each year the designation applies.
Spouses cannot be members of the same household
Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. A home you formerly shared is considered one household, even if you physically separate yourselves in the home. You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than one month after the date of the payment.
Exception
If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made.
Liability for payments after death of recipient spouse
If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. If all of the payments would continue, then none of the payments made before or after the death are alimony. The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law.
Example —
You must pay your former spouse $10,000 in cash each year for 10 years. Your divorce decree states that the payments will end upon your former spouse's death. You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. The death of your spouse would not terminate these payments under state law.
The $10,000 annual payments may qualify as alimony. The $20,000 annual payments that do not end upon your former spouse's death are not alimony.
Substitute payments
If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments are not alimony. To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. Whether or not such payments will be treated as not alimony depends on all the facts and circumstances.
Example —
Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 6 years or upon your former spouse's death, if earlier.
Your former spouse has custody of your minor children. The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. The trust income and corpus (principal) are to be used for your children's benefit.
These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Of each of the $30,000 annual payments, $10,000 is not alimony.
Example —
Under your divorce decree, you must pay your former spouse $30,000 annually. The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 - $300,000).
These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. None of the annual payments are alimony. The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment.
Child support
A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. The amount of child support may vary over time. Child support payments are not deductible by the payer and are not taxable to the payee.
Specifically designated as child support
A payment will be treated as specifically designated as child support to the extent that the payment is reduced either:
- On the happening of a contingency relating to your child, or
- At a time that can be clearly associated with the contingency.
Contingency relating to your child
A contingency relates to your child if it depends on any event relating to that child. It does not matter whether the event is certain or likely to occur. Events relating to your child include the child's:
- Becoming employed,
- Dying,
- Leaving the household,
- Leaving school,
- Marrying, or
- Reaching a specified age or income level.
Clearly associated with a contingency
Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations.
- The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority.
- The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. This certain age must be the same for each child, but need not be a whole number of years.
Recapture of Alimony
If your alimony payments decrease or terminate during the first 3 calendar years, you may be subject to the recapture rule. If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Your spouse can deduct in the third year part of the alimony payments he or she previously included in income.
The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Do not include any time in which payments were being made under temporary support orders. The second and third years are the next 2 calendar years, whether or not payments are made during those years.
The reasons for a reduction or termination of alimony payments that can require a recapture include:
- A change in your divorce or separation instrument,
- A failure to make timely payments,
- A reduction in your ability to provide support, or
- A reduction in your spouse's support needs.
When to apply the recapture rule
You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. When you figure a decrease in alimony, do not include the following amounts.
- Payments made under a temporary support order.
- Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment.
- Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year.
How to figure and report the recapture
Both you and your spouse can use Worksheet 1 to figure recaptured alimony.
Including the recapture in income
If you must include a recapture amount in income, show it on Form 1040, line 11 (“Alimony received”). Cross out “received” and enter “recapture.” On the dotted line next to the amount, enter your spouse's last name and social security number.
Deducting the recapture
If you can deduct a recapture amount, show it on Form 1040, line 31a (“Alimony paid”). Cross out “paid” and enter “recapture.” In the space provided, enter your spouse's social security number.
Example —
You pay your former spouse $50,000 alimony the first year, $39,000 the second year, and $28,000 the third year. You complete Worksheet 1 as illustrated (see next page). In the third year, you report $1,500 as income on Form 1040, line 11, and your former spouse reports $1,500 as a deduction on Form 1040, line 31a.
Worksheet 1. Recapture of Alimony
| Note.Do not enter less than -0- on any line. | |||||||
| 1. | Alimony paid in 2nd year | 1. | |||||
| 2. | Alimony paid in 3rd year | 2. | |||||
| 3. | Floor | 3. | $15,000 | ||||
| 4. | Add lines 2 and 3 | 4. | |||||
| 5. | Subtract line 4 from line 1 | 5. | |||||
| 6. | Alimony paid in 1st year | 6. | |||||
| 7. | Adjusted alimony paid in 2nd year (line 1 less line 5) | 7. | |||||
| 8. | Alimony paid in 3rd year | 8. | |||||
| 9. | Add lines 7 and 8 | 9. | |||||
| 10. | Divide line 9 by 2 | 10. | |||||
| 11. | Floor | 11. | $15,000 | ||||
| 12. | Add lines 10 and 11 | 12. | |||||
| 13. | Subtract line 12 from line 6 | 13. | |||||
| 14. | Recaptured alimony. Add lines 5 and 13 | *14. | |||||
| * If you deducted alimony paid, report this amount as income on Form 1040, line 11. If you reported alimony received, deduct this amount on Form 1040, line 31a. | |
| Worksheet 1.Recapture of Alimony—Illustrated |
| Note.Do not enter less than -0- on any line. | |||||||
| 1. | Alimony paid in 2nd year | 1. | $39,000 | ||||
| 2. | Alimony paid in 3rd year | 2. | 28,000 | ||||
| 3. | Floor | 3. | $15,000 | ||||
| 4. | Add lines 2 and 3 | 4. | 43,000 | ||||
| 5. | Subtract line 4 from line 1 | 5. | -0- | ||||
| 6. | Alimony paid in 1st year | 6. | 50,000 | ||||
| 7. | Adjusted alimony paid in 2nd year (line 1 less line 5) | 7. | 39,000 | ||||
| 8. | Alimony paid in 3rd year | 8. | 28,000 | ||||
| 9. | Add lines 7 and 8 | 9. | 67,000 | ||||
| 10. | Divide line 9 by 2 | 10. | 33,500 | ||||
| 11. | Floor | 11. | $15,000 | ||||
| 12. | Add lines 10 and 11 | 12. | 48,500 | ||||
| 13. | Subtract line 12 from line 6 | 13. | 1,500 | ||||
| 14. | Recaptured alimony. Add lines 5 and 13 | *14. | 1,500 | ||||
| * If you deducted alimony paid, report this amount as income on Form 1040, line 11. If you reported alimony received, deduct this amount on Form 1040, line 31a. | |
Instruments Executed Before 1985
Information on pre-1985 instruments was included in this publication through 2004. If you need the 2004 revision, please go to the IRS website at www.irs.gov.
Qualified Domestic Relations Order
A qualified domestic relations order (QDRO) is a judgment, decree, or court order (including an approved property settlement agreement) issued under a state's domestic relations law that:
- Recognizes someone other than a participant as having a right to receive benefits from a qualified retirement plan (such as most pension and profit-sharing plans) or a tax-sheltered annuity,
- Relates to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of the participant, and
- Specifies certain information, including the amount or portion of the participant's benefits to be paid to the participant's spouse, former spouse, child, or other dependent.
Benefits paid to a child or other dependent
Benefits paid under a QDRO to the plan participant's child or other dependent are treated as paid to the participant. For information about the tax treatment of benefits from retirement plans, see Publication 575.
Benefits paid to a spouse or former spouse
Benefits paid under a QDRO to the plan participant's spouse or former spouse generally must be included in the spouse's or former spouse's income. If the participant contributed to the retirement plan, a prorated share of the participant's cost (investment in the contract) is used to figure the taxable amount. The spouse or former spouse can use the special rules for lump-sum distributions if the benefits would have been treated as a lump-sum distribution had the participant received them. For this purpose, consider only the balance to the spouse's or former spouse's credit in determining whether the distribution is a total distribution. See Lump-Sum Distributions in Publication 575 for information about the special rules.
Rollovers
If you receive an eligible rollover distribution under a QDRO as the plan participant's spouse or former spouse, you may be able to roll it over tax free into a traditional individual retirement arrangement (IRA) or another qualified retirement plan. For more information on the tax treatment of eligible rollover distributions, see Publication 575.
Individual Retirement Arrangements
The following discussions explain some of the effects of divorce or separation on traditional individual retirement arrangements (IRAs). Traditional IRAs are IRAs other than Roth or SIMPLE IRAs.
Spousal IRA
If you get a final decree of divorce or separate maintenance by the end of your tax year, you cannot deduct contributions you make to your former spouse's traditional IRA. You can deduct only contributions to your own traditional IRA.
IRA transferred as a result of divorce
The transfer of all or part of your interest in a traditional IRA to your spouse or former spouse, under a decree of divorce or separate maintenance or a written instrument incident to the decree, is not considered a taxable transfer. Starting from the date of the transfer, the traditional IRA interest transferred is treated as your spouse's or former spouse's traditional IRA.
IRA contribution and deduction limits
All taxable alimony you receive under a decree of divorce or separate maintenance is treated as compensation for the contribution and deduction limits for traditional IRAs.
More information
For more information about IRAs, including Roth IRAs, see Publication 590.
Property Settlements
Generally, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer is because of a divorce. You may, however, have to report the transaction on a gift tax return. See Gift Tax on Property Settlements, later. If you sell property that you own jointly to split the proceeds as part of your property settlement, see Sale of Jointly-Owned Property, later.
Transfer Between Spouses
Generally, no gain or loss is recognized on a transfer of property from you to (or in trust for the benefit of):
- Your spouse, or
- Your former spouse, but only if the transfer is incident to your divorce.
This rule applies even if the transfer was in exchange for cash, the release of marital rights, the assumption of liabilities, or other consideration.
Exceptions to nonrecognition rule
This rule does not apply in the following situations.
- Your spouse or former spouse is a nonresident alien.
- Certain transfers in trust, discussed later.
- Certain stock redemptions under a divorce or separation instrument, or a valid written agreement that are taxable under applicable tax law, as discussed in section 1.1041-2 of the regulations.
Property subject to nonrecognition rule
The term “property” includes all property whether real or personal, tangible or intangible, or separate or community. It includes property acquired after the end of your marriage and transferred to your former spouse. It does not include services. Health savings account (HSA). If you transfer your interest in an HSA to your spouse or former spouse under a divorce or separation instrument, it is not considered a taxable transfer. After the transfer, the interest is treated as your spouse's HSA. Archer medi