Dear Penny: Does Money I Gave My Wife Count as Income in Our Divorce?
I gave my wife $1,000 a month to take care of the yard, house and my four dogs. She is divorcing me, and I’m having to pay her $1,750 court-ordered spousal support. Is the $1,000 considered income to her before filing for the divorce? If so, what forms do I need to report to the IRS?
— Head of Household
Dear Head,
It sounds like your wife’s domestic work was typical in the context of a household, so the money you gave her is most likely to qualify as a gift between spouses. For it to count as income, you would have had to have a formal arrangement to classify her as a W-2 household employee or a 1099 worker. To do that, you’d have had to formally hire her, either through an independent contract or by putting her on your household payroll via a W-4 form and a new hire filing with your state.
Assuming none of that is the case, the money you paid is a gift. A gift, per the IRS, is any money or asset given without receiving the same value (e.g. goods or services) in return. You could speak with a tax professional to determine whether your wife’s doing chores in exchange for the money would classify it as income — but it’s not likely as long as the arrangement was informal.
There’s no limit on the amount or value of a tax-exempt gift between spouses, and she doesn’t have to report that gift as income.
Dana Miranda is a Certified Educator in Personal Finance® and author of YOU DON’T NEED A BUDGET. She writes Healthy Rich, a newsletter about how capitalism impacts the ways we think, teach and talk about money.
