Military retirement pay to ex and taxes

Q: I am required by divorce decree to pay my ex-wife 11.25% of my mil­i­tary retire­ment. Because this amount is below the DFAS thresh­old for direct pay­ment, I send the money to her each month. In addi­tion, I also pay my ex-wife a size­able alimony pay­ment. Accord­ing to IRS Pub­li­ca­tion 504, I can­not report money given to my ex-wife as alimony that is not spec­i­fied as alimony in the divorce decree. Since the mil­i­tary retire­ment and alimony are both addressed sep­a­rately in the decree, the retire­ment pay is clearly not con­sid­ered alimony even though it’s clearly income for her. What is the appro­pri­ate way for these to be reported on my and her Fed­eral income tax?

–Joel, Wichita Falls, Texas

A: When it comes to tax advice you should seek the coun­sel of an accoun­tant. I would point out that what the IRS pub­li­ca­tion actu­ally says is that in order to qual­ify as alimony the divorce decree can­not des­ig­nate the pay­ment as “not alimony.” This would be the case if the divorce decree explic­itly spec­i­fied that cer­tain pay­ments would not be deductible for you and thus exclud­able from income for her. The other require­ments are:

  • Pay­ment is in cash
  • Spouses are not mem­bers of same house­hold at time pay­ments are made.
  • There is no lia­bil­ity to make any pay­ment after the death of the recip­i­ent spouse.
  • The pay­ment is not treated as child support

The long and short of that is that appears as if the pay­ment you make to her should be con­sid­ered, for tax pur­poses, as alimony. As I noted above, con­sult a Cer­ti­fied Pub­lic Accoun­tant for spe­cific guid­ance. Good luck.

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