Pre-1985 Divorce Decrees and Agreements
Divorce decrees issued before 1985 are subject to their own set of rules in regard to alimony payments and federal taxes. The IRS has laid out the following regulations.
There are three basic requirements for payments to be classified as alimony:
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They are required under a written agreement or decree., Gifts or voluntary payments are not considered alimony., Payments made before a divorce was final may be alimony if they are made under court order or written agreement; and,
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They are for support (“based on the marital relationship”), and are not compensation for PROPERTY RIGHTS, DEBTS, etc., Note that if the agreement says payments are “FOR SUPPORT OF SPOUSE AND CHILDREN” but does not set a specific amount for children, the payments are fully taxable as alimony if other requirements are met., This is true even if the payments are reduced when the child reaches eighteen, moves away, etc., The latter kind of arrangement is sometimes called a “Lester Agreement;” and
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They are “PERIODIC,” i.e., not installment payments on a fixed total amount. There is an exception for payments over a period longer than ten years or payments that are “contingent,” even if for ten years or less. Contingencies include death of either spouse, remarriage of the alimony-receiving spouse, etc. Payments need not be on any fixed schedule to be “periodic.”