About the Author

Diana Shepherd

Diana Shepherd is the Editorial Director of Family Lawyer Magazine and Divorce Magazine. An award-winning editor, published author, and a nationally-recognized expert on divorce, remarriage, finance, and stepfamily issues, she is a frequent lecturer on the topics of divorce, finance, and marketing – both to local groups and national organizations. She has also been a Certified Divorce Financial Analyst® since 2006.

12 Comments

  1. 1

    Ce Curts

    After this article was posted, DFAS changed their address from Cleveland to Indianapolis as follows:
    Defense Finance and Accounting Service
    U.S. Military Retired Pay
    8899 E 56th Street
    Indianapolis IN 46249-1200

    Reply
  2. 2

    Joe Yuna

    Unfortunately, when this Act was passed, several states like Virginia automatically made the proportion due to the ex-spouse non-negotiable. Now with the new tax code, if DFAS makes these same payments while the member does not by check or cash, does this income not qualify as alimony? And then what is it – spousal support therefore she is a dependent if the income received is larger than her own earned income? Did anyone in Congress or the military defend what little we receive while other benefits were eroded under Clinton?

    Reply
  3. 3

    Judith Bittikofer

    I want to know why a retired military member was 100% disabled under the VA and I was unable to touch his pay. I understand that but want to know why I was awarded a portion of his retired pay when he started receiving it and then the government stopped it and I had to pay back $8,000. I want to know why? This is his retired military pay and has nothing to do with disability pay. When I checked years ago I was told he had the option for me to receive it or not and he said he didn’t want me to receive it. You all have a copy of the divorce where it says I get a portion of his retired pay cause we were married 24 years could you please give me an explanation as to why?

    msjudy63@yahoo.com

    Reply
  4. 4

    Greg

    @Judith Bittikofer

    To answer your question, your former spouse payments are made from his ordinary retirement, NOT from any amounts he receives as disability payments.
    So when or if he becomes 100% disabled, ALL of his monthly retirement payments are NOW disability payments, meaning you now get $0. Because as I mentioned, what you were receiving were payments from his ordinary retirement. And it is a % of his retirement (not including any disability).

    Furthermore, this entire former spouse protection law is the biggest load of crap I’ve ever had to go through. What makes you or any ex-spouse entitled to our retirement after divorce until we die! This law should have NEVER been passed the way it was. It SHOULD have been written that you only receive those payments for the same amount of years that the calculations were performed to say how much you get each month. For example, if you were married for 10 years while he was on active duty, they use those 10 years to calculate the monthly payment. And the law should have said that you only are able to receive those payments for the same 10 years, then they STOP! The whole law is ridiculous. I mean these payments are considered Alimony IAW the IRS, and typically Alimony stops when the ex-spouse remarries. But under this stupid law WE (the military retiree) are screwed for life! Bunch of BS!

    Reply
    1. 4.1

      Kelly

      Greg, I feel ya. 🙂 There is certainly some further discussion that needs to be had on this issue. Sad thing, if you realize it, is that this all came about because of a retiring admiral who had affections for his assistant…

      Reply
    2. 4.2

      C

      You are rude. Half of the military wouldn’t even make it to retirement without their military spouses. When you retired, if you were married, she retired too. Don’t get me started on if I had to raise your children from a former marriage! I am glad the law has changed. We deserve it. Suck it up and show respect for us as former spouses! Pay up!

      Reply
      1. 4.2.1

        AJ

        Ha! Are you joking “C”? If “half the military wouldn’t even make it to retirement”? How would you explain those who are single and do just fine. Wow, you really drank the kool aid. A military spouse is not some special snowflake, you didn’t “serve too”, and all the other garbage you were fed. I must be some sort of fu**ing unicorn. Duel military (I’m a reservist) 2 kids, full time job, home owner, husband that’s AD and deploys. Geez how is that possible!?! When I was doing areomeds out of Balad, I didn’t see any military spouses on that plane!?! Did I miss you? You must have been in the plane behind us? If you want the benefits, join the military and see how hard it really is, I know an excellent recruiter that can hook you up. SMDH. Quit with your BS of you serve too. You cheapen the Veteran, especially the female veterans experience when you say that. Raising kids and paying bills is called being an adult.

        Reply
  5. 5

    T.O.G

    Good discussion. I was raised by strong, solid parents, and was always taught to make sure I could always handle my own bills, and navigate through life, without the assistance of anybody. I see alimony as a crutch for ex-spouses, and I don’t agree with it. I will be paying out a % of my retirement once my ex completes the necessary paperwork, and I have also been paying child support and for a period of time, alimony. There are a few differences though, if you have paid alimony and child support, you know what they are. If you pay child support, there are exactly 0 tax breaks, rightfully so. You had a child with your ex-spouse, and you are responsible for that child, so you pay, and you pay until that child is 18. However, if you pay alimony, to a grown adult who may or may not be working, I see that as an unnatural way to receive money. The punishment for the ex-spouse is that individual receives some tax penalties, and the benefit to the payee is that person gets some tax breaks and a nice increased tax return.

    So, deserving a retired military members pay…would definitely not put it that way. If that person deserved that money, it would come with no strings, no tax penalties, and no extra paperwork to be completed. Before my divorce became final and the court made its judgement, I had already been paying my soon to be ex-wife what the child support calculator on childsupport.ca.gov identified. However, I did not include alimony, because the adult should be able to figure out a way to handle bills, and navigate through life.

    Reply
  6. 6

    Harry Newman

    As part of a property settlement, my daughter was awarded 39% of her retired husband’s military pension. Since the law has changed regarding taxability of divorce settlements, is her portion taxable income? The money is paid directly to her by the government but it still is essentially paid to him and then he authorizes the government to pay it to her. Isn’t this covered under the latest tax law revisions? Any information that you can provide will be deeply appreciated.

    Reply
    1. 6.1

      Mark Sullivan

      While there were changes in the taxability of alimony in the Tax Cuts and Jobs Act, nothing changed regarding the taxation of pension-division payments. When such payments are made according to the IRS rules and are incident to divorce, the recipient is charged with taxable income and the payor may exclude payments made from his/her taxable income.

      The money is paid directly to her by the government but it still is essentially paid to him and then he authorizes the government to pay it to her.

      It’s unclear whether this means that:

      • The ex-husband has taken out an allotment to have the govt. pay the ex-wife, or
      • There was a military pension division order which required the retired pay center – usually DFAS, the Defense Finance and Accounting Service – to make monthly payments to the spouse as a result of a 10/10 marriage (i.e., ten years of marriage during ten years of creditable military service toward retirement).

      If it’s the former, then the payments are being made to him and he’s indeed authorized the govt. to make payments to her. There are two problems here – A) the voluntary allotment can be stopped as easily as it can be started; there is no guarantee of continuity of payments. And B) I’ve NEVER seen an allotment which took into account annual COLA’s [cost-of-living adjustments], and that can be a substantial financial issue. Every December, when there is a COLA, it’s applied to the pension of a military retiree. Does the former spouse get a share? The answer is YES except when the pension division calls for a fixed dollar amount [e.g., Jane Doe gets $500 from John Doe’s retired pay”]

      If it’s the latter, then COLAs are applied automatically, and each party receives a Form 1099-R each January to account for payments made to each one.

      Isn’t this covered under the latest tax law revisions?

      No – the new law made no changes in this area.

      Reply
  7. 7

    Joe-san

    My question is on federal taxes. I am retired military, divorced, and ordered by the court (divorce decree) to pay my ex-wife 43% of my retired pay and alimony. The divorce decree directed my ex to get her DFAS account so she could receive her share of my retirement directly from DFAS. It also directed me to pay her directly the amount of her share of my retirement pay until her account was established. Once started, her payment from DFAS would be taxed (both state and federal) and she would receive a 1099-R each year to use when she files taxes. She has not sent the paperwork to DFAS to start her account and I just pay her every month by transferring money to her checking account. My question is this: Since I have been paying her directly and she has been receiving a tax-free payment from me, can I claim this money when I file my taxes as a deduction (alimony) and report the amount as income for her. She is really getting over because I’m being taxed on the money I transfer to her but it’s tax-free to her unless I can claim it as a deduction.

    Reply
    1. 7.1

      Mark Sullivan

      This is very complicated, and you should consult with a CPA who is experienced in divorce taxation to obtain a correct result and competent advice.

      Here are some general points about taxes for the recipient and the exclusion of pension-share payments for the payor, in regard to a “defined benefit plan” (such as military retirement under Chapter 71 of Title 10, U.S. Code).

      1. The failure to properly write a court order that divides the pension may lead to serious unintended tax consequences. The use of a military pension division order (MPDO) is essential in dividing military retired pay. Such an order can ensure that the recipient is taxed on the money received and the payor can exclude the payments from his or her taxable income.
      2. The Internal Revenue Code, 26 U.S.C. 414(p), makes it possible to divide defined benefit plans such as the military pension without causing unnecessary problems, but the attorney or other expert must be familiar with the rules. The Code section requires specific facts to be set out in the MPDO, including the names and addresses of the parties, the percentage or fixed amount of the military retiree’s pay which is to go to the ex-spouse, the method of payment, and so on.
      3. There is some guidance on the DFAS web page, https://www.dfas.mil, as to how to write the order and what it needs to say. Other information is contained in the Dept. of Defense Financial Management Regulation, Vol. 7b, Chapter 29, “Former Spouse Payments.”
      4. However, as stated before, the best approach is to hire an expert to do this! Never try to do this kind of work by yourself.
      5. Once the order has been prepared, it should be signed by the other party and tendered to the court for signing and filing. A certified copy of the order and the divorce decree must accompany DD Form 2293 (signed by the ex-spouse) when the papers are submitted to the retired pay center. If the ex-spouse will not sign, then a hearing should be scheduled and an appropriate motion filed to request that the court enter the order without the signature of the payee.
      6. Alimony is no longer tax-deductible, so that’s out of the question. The Tax Cuts and Jobs Act did away with special tax treatment for alimony.
      7. Upon the advice of an expert, it may be possible for the reader to claim an exclusion from income if ALL of the above terms have been met in the existing court order for division of retired pay (or separation agreement incorporated into the divorce decree). But… that depends on the advice of the tax expert who advises you after reading the existing settlement papers.

      Please note that these points (above) may or may not apply to your unique situation; for legal advice, you must seek advice from an experienced attorney.

      Reply

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