Can You Deduct Temporary Maintenance Payments?
It is tax season. I am frequently asked if a person who is obligated under a temporary court order may deduct those maintenance (spousal support) payments, from their taxes. While there is no specific I.R.S. rule that says you can’t deduct them, one would need to comply with all of the conditions and terms under I.R.S. sec. 71 and 215 to take the deduction. Here are the conditions:
- They are paid in dollars, cash received by or on behalf of a spouse.
- The payments are made pursuant to a written divorce or separation document.
- The payments cannot be designated as non-taxable (not includible in gross income and not allowable as a deduction.
- You can’t be members of the same household.
- The payments must stop upon the death of the payee spouse.
- Payments cannot be fixed as child support.
- Separate returns must be filed, not joint.
If the temporary payments fail to satisfy any of these essential elements, you cannot take the deduction on your taxes.
Since most temporary support orders do not have language about the payments terminating upon death of either party, one of the essential elements for the deductibility of the payments puts them at risk. Many times, the court on a temporary basis will label the payments as specifically “non-taxable temporary family or spousal support.” Such language also bars taking the payments as a tax deduction.
It gets further complicated in the state of Wisconsin, as you have to comply with marital property law requirements prior to the final divorce. This means for any tax year in which you are not divorced, absent a martial tax reclassification agreement for that particular tax year, or if you were not domiciled in the state of Wisconsin, you are required to report one-half of each other’s income, credits and deductions on each other’s tax returns, if filing separate but married. This in and of itself would defeat the purpose of claiming the spousal support as a tax deduction as you would be required to give half that deduction to your spouse, and also be required to report half of the income received (payments made). It is for those reasons that it is generally not advisable to try to claim temporary spousal support payments as a tax deduction in the middle of the divorce. You certainly cannot do it when filing a joint return with your spouse, and it is filled with pitfalls when filing separate but married.
For more information on this topic see Frumkes’ on Divorce Taxation and 2016 U.S. Master Tax Guide, – Wolters Kluwer
Do you have questions on whether you can deduct your support payments? Contact one of our attorneys at Karp & Iancu, S.C.