The Taxation of Alimony: Policies, Problems and a Proposal

Alimony payments are taxable to the wife and deductible by the husband; however, to be considered alimony, the payments to the wife must be both out of the husband's current income and in discharge of his legal obligation to support his wife. This is a peculiar statutory definition, because it refers to both the source and application of the payments and the author suggests that Congress was unable to decide whether alimony payments are an income or expense item. The result of this congressional ambivalence has been an unequal application of the laws: those who have expert legal advice can reap advantages of this confusion. The author examines the policies behind the two approaches to taxing alimony and suggests statutory reforms to cure the present inequities.