Are alimony payments considered taxable income?
Alimony, separate maintenance, and similar payments from your spouse or former spouse are taxable to you in the year received. The amount is reported on line 11 of Form 1040 (PDF). You cannot use Form 1040A (PDF) or Form 1040EZ (PDF). Refer to Tax Topic 406, Alimony Received, or Publication 504 (PDF), Divorced or Separated Individuals.
To help determine if these payments are or are not alimony, please read the following:
The following rules apply to payments under divorce or separation instruments executed after 1984. They also apply to instruments that were modified after 1984 to:
- Specify that these rules will apply or
- Change the amount or period of payment or to add or delete any contingency or condition.
For the rules for alimony payments under pre-1985 instruments, please see Publication 504 (PDF), Divorced or Separated Individuals.
A payment to or for a spouse or former spouse under a divorce or separation instrument is alimony, if the spouses do not file a joint return with each other, if the following conditions are met:
- The payment must be made by cash, check, money order, etc.
- The instrument does not designate the payments as "not alimony."
- The spouses are not members of the same household at the time the payments are made.
- There is no liability for payments after the death of the recipient spouse.
- The payment is not treated as child support.
For an explanation of these requirements please see, Publication 504 (PDF), Divorced or Separated Individuals.
References:
- Publication 504 (PDF), Divorced or Separated Individuals
- Form 1040 (PDF), U.S. Individual Income Tax Return
- Form 1040A (PDF), U.S. Individual Income Tax Return
- Form 1040EZ (PDF), U.S. Individual Income Tax Return for Single and Joint Filers with No Dependents
- Tax Topic 406, Alimony Received
Are child support payments considered taxable income?
No. Some types of income taxpayers receive are not taxable and child support is one of them. When you total your gross income to see if you are required to file a tax return, do not include your nontaxable income. For additional information, refer to Tax Topic 422, Nontaxable Income, or Publication 525 (PDF), Taxable and Nontaxable Income.
References:
Because of my age, my employer wanted to terminate my employment. I signed a statement not to sue and received a lump-sum payment from my employer for age discrimination. Is this payment taxable?
A lump-sum payment for cancellation of your employment is taxable income in the year you receive it and must be reported with your other salary and wages. This is true even if the payment was received (by suit or agreement) as settlement under the Age Discrimination in Employment Act.
Refer to Publication 525 (PDF), Taxable and Nontaxable Income, for more details.
References:
- Publication 525 (PDF), Taxable and Nontaxable Income
- Tax Topic 422, Nontaxable Income
- Revenue Ruling 96-65 and Commissioner v. Schleier, 515 US 323 (1995)
Is the money received from my settlement taxable?
For court awards and damages, to determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item which the settlement replaces. Include the following as ordinary income:
- Interest on any award.
- Compensation for lost wages or lost profits in cases. Other than those where the payments are for wages lost as a result of physical injury.
- Punitive damages. (But see below)
- Amounts received in settlement of pension rights (if you did not contribute to the plan).
- Damages for:
- Patent or copyright infringement.
- Breach of contract.
- Interference with business operations.
- Any recovery under the Age Discrimination in Employment Act.
- Injury to your reputation .
- Alienation of affection.
Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments).
Damages for emotional distress due to a physical injury or physical sickness are not taxable.
Punitive damages are taxable. It does not matter if they relate to a physical injury or a physical sickness.
For additional information, refer to Publication 525 (PDF), Taxable and Nontaxable Income, or Tax Topic 422, Nontaxable Income.
References:
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