I used to pay my wife $1,000 each month to handle yard work, keep up the house and care for our four dogs. She is now divorcing me, and a court has ordered me to pay $1,750 a month in spousal support. Would that $1,000 have been considered her income before the divorce filing? If it would, which forms should I have filed with the IRS?
— Head of Household
Dear Head,
From what you describe, your wife’s responsibilities were the normal domestic duties one sees in a household, so those monthly payments most likely qualify as gifts between spouses. For those sums to have been treated as taxable income, there would need to have been a formal arrangement designating her as a household employee (W-2) or an independent contractor (1099). That would have required officially hiring her — either by establishing an independent contractor agreement or adding her to a household payroll via a W-4 and completing any required state new-hire paperwork.
If none of those formal steps were taken, the payments are treated as gifts. According to the IRS, a gift is money or property given without expecting equivalent value in return. You could consult a tax advisor if you think the arrangement was more like a payment for services rather than informal support, but in typical, informal household situations it is unlikely to be considered taxable income.
There is no dollar limit on tax-free gifts between spouses, and your wife would not need to report those monthly gifts as income.
Dana Miranda is a Certified Educator in Personal Finance® and author of YOU DON’T NEED A BUDGET. She writesHealthy Rich, a newsletter about how capitalism affects the ways we teach, discuss and manage money.
