The general rule is that spousal support (or alimony) is taxable to the recipient and deductible by the payor. Child support, on the other hand, is not taxable to anyone (recipient or child) and it is not deductible. The deduction for spousal support can be very valuable to the payor. It is accounted for as a reduction of income for the payor. The support payments are reduced from the payor’s gross income.
There are a few requirements for spousal support to be tax deductible. First, the payments must be made in cash only. The payment doesn’t need to be made in actual cash, but in the form of cash, such as a check, money order, or even an automatic transfer of funds between accounts. It just can’t be “in kind” support, for example food or goods.
The other spouse must receive the support by a divorce or separation instrument. This could be an agreement to pay support, or an order from the court. The agreement or order from the court may specify whether the support payments will be tax deductible or not. Also, the support will not be deductible if the parties file a joint return for the taxable year in question.
Unfortunately, support payments will not be deductible even if they are made after a final judgment of divorce or separation if the separated or divorced spouses are still living in the same residence. This can be difficult for some parties who face separation. With high housing costs, many couples choose to remain living together in the same residence to avoid having to purchase or rent and maintain an additional residence, especially if there are children involved.
This means the parties cannot occupy the same physical structure, even if they are physically separated by living and sleeping in different rooms. The tax regulations do allow for a grace period of one month from when a payment is made to allow for either spouse to move out of the shared residence and take the deduction. The Regulations also allow a deduction for payments made under a separation agreement or temporary support order prior to divorce, even if the spouses are still living together.