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Payments for alimony and separate maintenance, also commonly known as "spousal support," are reported by the receiving or payee spouse as gross income on federal income tax Form 1040. The payor spouse takes a deduction for the payments by reporting them as an adjustment or subtraction to gross income on his or her own Form 1040.

The payee spouse is required to provide his or her social security number to the payor spouse, and the payor spouse is required to include the payee's social security number on his or her return. The Internal Revenue Service (IRS) will impose a $50 fine for either spouse's failure or refusal to do his or her part with respect to social security numbers.

The IRS will not deny the tax deduction for alimony as an additional penalty for payor spouse's failure to provide the payee spouse's social security number. Rather, only the $50 penalty is imposed.

Withholding Requirements

No withholding is generally required on alimony or spousal support payments unless the payments are made to a spouse or ex-spouse who is a non-resident alien. In that case, the payor spouse must deduct and withhold tax from those payments at the rate of 30 percent, because the payments are treated as income from a United States source.

This withholding requirement applies even if the payments are made from an account maintained outside of the United States.

Payments Relating to the Family Residence

Payments Relating to a Residence Owned by the Payee Spouse

A payor spouse who pays mortgage payments, real estate taxes, or insurance premiums on a home owned by the other spouse may deduct those payments as alimony, provided that the other alimony requirements are met. This is possible because the payments are made on behalf of the spouse. In addition, if the payee spouse itemizes deductions, he or she may deduct real estate taxes, and, if the house is a qualified home, interest on the mortgage.

However, if for some reason the payor spouse is not eligible for an alimony deduction for mortgage and real estate tax payments, he or she will probably not be entitled to an interest deduction under Internal Revenue Code (IRC) § 163 for such payments on a home owned by the payee spouse. That is so because the interest is unlikely to qualify as qualified residence interest with respect to the payor spouse, or also because the payor is not named on the mortgage.

Use caution here. The statutory and regulatory framework for the deduction of interest for marital homes related to divorce is still unclear. Especially unsettled matters in this area of tax law include:

• The ownership interest that the spouse who moves out of the marital home must retain, if any, in order for the mortgage payments to qualify as qualified residence interest, as well as to make certain that the debt is adequately secured by that spouse's interest in the home
• The manner in which the use of the marital home by an ex-spouse and children is treated as personal use by the absent spouse under IRC § 280A(d), which has a direct impact on whether the home is a ''qualified residence'' for absent spouse, which in turn makes mortgage interest deductible for that spouse.

Until these matters are cleared up, the claiming of interest deductions with respect to a marital home by a payor spouse who does not live in the home is, at best, an uncertain proposition. When negotiating the terms of a divorce decree or separation agreement, it might be wise to specify that items such as one spouse's responsibility for mortgage payments are contingent on IRS acceptance of the tax benefits listed in the decree, or to require the non-paying spouse to reimburse the payor if those expected benefits are denied by the IRS.

Payments Relating to a Residence Owned by the Payor Spouse

Payments, including mortgage payments, real estate taxes, and insurance premiums, that are made to maintain property that owned solely by the payor spouse, but is used by the payee spouse, are not payments on behalf of a spouse. So, such payments are not deductible as alimony, even if they made according to the terms of a divorce decree.

In addition, apart from out-of-pocket payments, a spouse who owns a home cannot deduct its rental value as spousal support even if the other spouse lives there rent-free.

Payments Relating to a Jointly Owned Residence

When a payor spouse makes payments on a mortgage for which both spouses are jointly liable, or co-signors, a portion of those payments is income in the hands of the non-paying spouse. So, in such instances, one-half of the mortgage payment is includable in the gross income of the non-paying spouse, to the extent it otherwise qualifies as alimony, and it is deductible by the payor spouse as alimony.

In addition, the payor spouse may also claim an itemized interest deduction for the remaining one-half of the interest paid, that is, the portion not already deducted as alimony, provided that the interest qualifies a qualified residence interest. The same rules apply for real estate taxes, for property that is held as tenants in common.

For property held as tenants by the entirety or in joint tenancy, the IRS takes the position that none of the payments for real estate taxes qualify as alimony, but that they may be deducted in full as an itemized deduction by the payor spouse.

Remember, it is unclear whether a payor spouse can claim an interest deduction for mortgage payments made on a former marital home that he or she no longer occupies. It is also unclear whether the payor spouse can gain a tax benefit by designating such a home as the ''other residence."

To qualify as an ''other residence,'' that residence must be used by the taxpayer. Use of the home by family members, however, can be treated as personal use by the absent payor spouse. Family members for this purpose include siblings, spouse (but not ex-spouse), ancestors, and lineal descendants, which includes a taxpayer's children. Thus, if a payor spouse's children reside in the former marital home, this may be sufficient to qualify the home as the other designated home of the payor spouse, so as to make the home eligible for interest deductions.

Rental Arrangements

In some circumstances, it might be best for the spouse who owns a house to charge the other spouse rent to live there. The owner-spouse could increase deductible spousal support to cover the rent payments, but he or she would have to compensate the renter-spouse for the additional tax liability. The same approach might be taken if the residence is owned jointly or as tenants in common but only one spouse will be living in it.

In either situation, the rent charged should be a fair market rental. That way, the owner-spouse should be able to deduct depreciation and take other deductions because the property could be considered to be held for the production of income. If the rent is not at market rate, losses and deductions will not be allowed because the property will not be considered held for the production of income.

Finally, it is important that the parties act in arm's-length business manner in matters pertaining to the lease. For example, the non-occupant spouse should not voluntarily pay for maintenance of the house.