The DFAS Military Divorce 10 Year Rule
Should the DFAS 10 Year Rule be Changed?
When we discussed service members claiming alimony on their tax returns, we mentioned how the book, Military Divorce Tips recommends that DFAS pay the former spouse portion of the division of military retired pay.
For DFAS to make this payment, the 10/10 rule applies, which means:
- The marriage must have existed for a minimum of 10 years and
- At least ten years of marriage must overlap with 10 years of credible service
When the 10/10 rule is not met, DFAS will not make the payment and the service member must make the payment to the former spouse.
There are a few reasons this is not ideal:
- DFAS will issue a Form 1099-R for the service member for the entire amount of retirement pay which can leave the service member responsible for all the applicable taxes
- When service members make the former spouse payment, service members might think they should claim the former spouse portion as alimony paid on their tax return
- If service members record the former spouse portion as alimony, the perception is that it actually is alimnoy, where as the divorce decree already declared it property by using the USFSPA
- Service members paying former spouses (whether by check or direct allotment) adds to the perception that the service member is SUPPORTING the former spouse
Should DFAS always pay the Former Military Spouse?
If DFAS were permitted to make all payments to the former military spouse — regardless of length of marriage, these issues would disappear.
- DFAS could issue a Form 1099-R to both the service member and former military spouse (as it currently does for marriages meeting the 10/10 rule)
- There would be no confusion concerning alimony on tax returns. The service member and former spouse would always each receive a Form 1099-R and report the amount under income, pensions received.
- Perceptions of the service member “supporting” the former military spouse might change
- Communication would be reduced between service member and former spouse, allowing both to move forward with their lives.
As of today though, if a marriage does not meet the 10/10 rule, then DFAS cannot make the payment and the service member will have to make arrangements to pay the former spouse.
In these cases, the best answer is for the service member to set up an allotment through DFAS to pay the former spouse directly. This ensures timely payments will continue regardless of the service members location, medical issues, or emergencies, and no one has to worry about a check lost in the mail.
Taxes and Divorce
When couples have a pending divorce, it’s easy to forget or overlook the tax impact. Couples should also take a look at their Will to see if anything needs revision. These items may help:
When it is NOT Alimony, it cannot be considered ALIMONY. It is considered PROPERTY. My former spouse is the one receiving the entire military retirement pay and he’s order to give me a certain percent. However, DFAS will only issue him the 1099 because the will not pay me direct and they will not issue me a 1099 because they have no clue if he is or isn’t paying me or the amount. He is being taxed on the full amount and is claiming the income on his taxes and uses his 1099. It would be double taxation if I am taxed on it and I cannot deduct it or get a 1099 from him for the division of property. We are not entitled to alimony according to our rules in our state. It is considered property and it would be the equivalent of him giving me a chair every month. I can’t claim a chair on income taxes. It is NOT a pension or a 401k.
Please note that all the “ride-along ads” with this blog that offer to “buy out your Pension” should be disregarded as military retired pay is NOT a “pension” – military retired pay is reduced current pay – taxable income – for reduced current service.