1) All payments must be made in cash, check, or money order. If the payor is paying the payee’s rent or mortgage payment directly, it may qualify if so stated in writing in the separation agreement as long as payor no longer owns an interest in the property. If he/she is still a 50% owner, only 50% of mortgage payment would be deductable.
2) There must be a written court order or separation agreement. This is true for post decree modifications as well. They must be in writing to be considered for spousal support tax treatment.
3) The couple may not have agreed that the payments are not to receive spousal support tax treatment. If they agree a payment is not for spousal support in the separation agreement, they cannot reclassify it later.
4) The parties may not still be living together at the time of the divorce. They must be living is different locations at the time of the divorce. However, during the temporary orders period – before the divorce is final – the parties may still reside in the same home.
5) The payments must terminate on the payee’s death. However, the obligation to pay spousal support may survive the payors death if stated in writing.
6) The parties may not file a joint tax return. Tax status is determined on December 31 of each year.
7) No portion fo the payment may be considered child support. If spousal support is reduced 6 months before or after the date a child reaches the age of majority for the state (19 in Colorado), the amount of the reduction is considered child support and not spousal support – and is reclassified back to when the support began. (The Child Contingency Rule – IRC 71(c)(2).)
Further details can be found on the Spousal Support page of this website.