Tax Tip 2023-97: Tax considerations for people who are separating or divorcing

Internal Revenue Service (IRS) sent this bulletin at 07/31/2023 11:23 AM EDT

IRS Tax Tips

July 31, 2023

Issue Number: Tax Tip 2023-97

Tax considerations for people who are separating or divorcing

When couples separate or divorce, the change in their relationship status affects their tax situation. The IRS considers a couple married for tax filing purposes until they get a final decree of divorce or separate maintenance.

Update tax withholding
When a taxpayer divorces or separates, they usually need to update their proper tax withholding by filing with their employer a new Form W-4, Employee's Withholding Certificate. If they receive alimony, they may have to make estimated tax payments. Taxpayers can figure out if they’re withholding the correct amount with the Tax Withholding Estimator on IRS.gov.

Tax treatment of alimony and separate maintenance

Amounts paid to a spouse or a former spouse under a divorce decree, a separate maintenance decree or a written separation agreement may be alimony or separate maintenance for federal tax purposes.
Certain alimony or separate maintenance payments are deductible by the payer spouse, and the recipient spouse must include it in income.

Rules related to dependent children and support
Generally, the parent with custody of a child can claim that child on their tax return. If parents split custody fifty-fifty and aren't filing a joint return, they'll have to decide which parent claims the child. If the parents can’t agree, taxpayers should refer to the tie-breaker rules in Publication 504, Divorced or Separated Individuals. Child support payments aren't deductible by the payer and aren't taxable to the payee.

Not all payments under a divorce or separation instrument – including a divorce decree, a separate maintenance decree or a written separation agreement – are alimony or separate maintenance. Alimony and separate maintenance doesn’t include:

Child support
Noncash property settlements – whether in a lump-sum or installments
Payments that are your spouse's part of community property income
Payments to keep up the payer's property
Use of the payer's property
Voluntary payments

Child support is never deductible and isn't considered income. Additionally, if a divorce or separation instrument provides for alimony and child support and the payer spouse pays less than the total required, the payments apply to child support first. Only the remaining amount is considered alimony.

Report property transfers, if needed
Usually, if a taxpayer transfers property to their spouse or former spouse because of a divorce, there’s no recognized gain or loss on the transfer. People may have to report the transaction on a gift tax return.

More information:
Topic No. 452 Alimony and Separate Maintenance

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Tax Tip 2023-97: Tax considerations for people who are separating or divorcing

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Issue Number: Tax Tip 2023-97