37.5 Child Support Payments Are Not Alimony

A payment that is specifically designated as child support in the divorce or separation instrument (37.2) is not deductible by the payer or taxable as alimony to the payee.

Even if there is not a specific allocation to child support, a payment will be presumed by the IRS to be payable for child support if it is to be reduced on the happening of a contingency relating to the child, such as: the child reaches a specific age or income level, or the child leaves school, marries, leaves the parent’s household, or begins to work.

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Alimony Reductions Tied to Child’s Age
If a reduction in your payments is not specifically tied to your child’s reaching majority age but the scheduled date for the reduction is within six months before or after your child reaches age 18 or 21 (or other age of majority under local law), the IRS holds that the reduction is tied to the child’s age. The reduction amount will be treated as child support unless you can prove that the reduction is for some other purpose. The IRS makes the same presumption if you have more than one child and your alimony payments are to be reduced at least twice and each reduction is within one year of a different child’s reaching a particular age between ages 18 and 24; see the Example in 37.5.
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If a divorce or separation instrument requires both alimony and child support payments, and child support payments for a prior year were missed, or current-year child support payments are less than the required amount, an expected alimony deduction for current-year payments can be lost because the payments are applied first to the child support obligations, including any arrearage. For example, a taxpayer paid $17,963 to his ex-wife in 2004. His total child support obligation in 2004 for his two children was $23,147, of which $12,000 was for 2004 child support, $5,125 for past-due child support, and $6,022 to reimburse his ex-wife for her payment of health insurance premiums and medical expenses for the children that he was obligated to pay. Since his total payments in 2004 of $17,963 were less than the total child support owed for 2004, the Tax Court held that all of the payments were allocable to the child support and not deductible as alimony.

Tax refund diversion for delinquent child support.

The IRS can give your tax refund to a state that is paying support to your child if you fail to make support payments. The IRS will not notify you of the diversion until it is made to the state. However, the state agency must provide prior notice of the proposed offset and procedures for contesting it.

EXAMPLE
On July 1, 2012, Thomas and Tina are divorced when their children, John (born July 15, 1997), and Jane (born September 23, 1999), are ages 14 and 12. Under the divorce decree, Thomas is to make monthly alimony payments of $2,000. The monthly payments are to be reduced to $1,500 on January 1, 2018, and to $1,000 on January 1, 2022. On January 1, 2018, the date of the first reduction, John will be 20 years, 5 months, and 17 days old. On January 1, 2022, the date of the second reduction, Jane will be 22 years, 3 months, and 9 days old. As each reduction is to occur not more than one year before or after each child reaches the age of 21 years and four months, the IRS will presume that the reductions are associated with the happening of a contingency relating to the children. The two reductions total $1,000 per month and are treated as the amount fixed for the support of the children. Thus, $1,000 of the $2,000 monthly payment does not qualify as alimony. To avoid this result, Thomas must prove that the reductions were not related to the support of the children.
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