Whether you’re drawing up a separation agreement or already have the divorce decree in hand, there can be a lot of challenging financial and tax implications to getting divorced. And if you’ll be paying or receiving alimony payments as part of your divorce agreement, you may already be wondering how that income gets reported on your tax return.
The good news is thanks to the simplification of tax rules surrounding divorce courtesy of the 2017 Tax Cuts and Jobs Act (TCJA), the Internal Revenue Service (IRS) no longer requires certain types of spousal report, specifically alimony payments, to be reported as part of your taxable income.
Let’s take a closer look at what that might mean for your tax liability and that of your former spouse — and why former couples with a divorce agreement or court order that predates 2019 have to follow different tax rules.
Is alimony taxable?
The answer depends on when you got divorced. If your divorce or legal separation was finalized on Jan. 1, 2019 or later, alimony or maintenance payments are not taxable as gross income for the recipient spouse.
For those who don’t fall under the new rules, tax treatment of alimony can be a bit more complicated. If your divorce was finalized on or before Dec. 31, 2018, alimony is required to be reported on your income tax return. The receiving spouse should report any amount of alimony as income to the IRS.
Are alimony payments tax-deductible?
If you’re the taxpayer responsible for paying alimony, that money is not deductible for divorces finalized in 2019 or after.
If your divorce decree predates 2019, the alimony deduction is a bit more complicated. For the paying spouse, alimony payments are eligible for an above-the-line tax deduction, which may help you avoid landing in a higher tax bracket.
What types of spousal support count as alimony?
Alimony is defined as financial support one ex-spouse, usually the higher earner, pays to another. This is different from separate maintenance, which is financial support that is part of a legal separation when couples are still married.
To be considered alimony for tax purposes, the IRS says the spousal support needs to meet the following criteria:
A joint tax return isn’t filed for the current tax year.
The payment is made through cash, check, or money orders.
The payment goes to a spouse or a former spouse under a divorce or separation instrument.
Spouses or ex-spouses aren’t sharing a household when the payments are made.
Payments aren’t required to be made either in cash or property after the death of the receiving spouse.
Payment isn’t part of a property settlement or child support payments.
To be considered alimony, the divorce or separation agreement also can’t specify that the payment needs to be part of the gross income of the payee spouse or that it isn’t allowable as a deduction to the payer spouse.
Is the tax law for alimony different from child support?
Child support is a form of spousal support designed to financially provide for adopted or biological children of the marriage. Typically, child support is paid directly to the parent with primary custody or the one considered by the court as the custodial parent until the child is 18.
While child support is considered different from alimony for tax purposes, the rules are similar. Child support is not taxable as income, nor are the payments tax deductible. This tax approach for child support payments has been consistent in family law for many years.
Frequently asked questions about taxes and alimony
- When do I have to report alimony on my taxes?
If your divorce decree was finalized before January 1, 2019, you are required to report alimony or alimony payments you receive on your federal tax return using Form 1040, Schedule 1.
In the case of the alimony payer, pre-2019 payments have tax benefits and are an above-the-line deduction. You can enter the amount of alimony paid and the recipient’s Social Security number in your Form 1040.
For divorces finalized after 2019, neither the paying or receiving spouse must report alimony to the IRS.
- Is the treatment of alimony for tax purposes different in each state?
Yes, alimony payments can be handled differently depending on your state. For example in California, payments on community property income are not considered alimony. You should consult your state’s revenue department website for more information about how to report spousal support for state tax purposes.
- Who gets the tax deduction for claiming a dependent after a divorce?
Generally, the custodial parent should claim the child as a dependent in order to receive the child tax credit, but this can also depend on whether the divorce decree specifies a different approach. For instance, some parents may agree to take turns claiming the dependent every other tax year.
For the IRS, the custodial parent is the parent with whom the child or dependent lives for the majority of the tax year.
