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Cheat Sheet:

Alimony and Your Tax Return 

Is it income, a deduction or neither?

Divorced in 2018 and confused on whether alimony in included as income to determine if you’re required to file a tax return, this cheat sheet's for you. 

 

Tax filing season has started, and many divorced individuals are confused on reporting alimony payments as taxable income or a deduction.

 

The simple answer: it depends on whether the divorce was on or before December 31, 2018.

Effective January 1, 2019, the new tax law changed the way alimony is reported and taxed.  Specifically, alimony is no longer deductible by the paying spouse and no longer taxable as income for the recipient spouse.

The text of Section 11051 is included at the end of this article. But, for those who need the bottom line, we’ve created an alimony and child support cheat sheet.

 

ALIMONY AND CHILD SUPPORT CHEAT SHEET

Question

Are alimony payments or child support payments considered taxable income?

Do I include payments to determine if I am required to file a tax return?

Can I deduct my child support and alimony payments?

Answer

  • Child support payments

    • Not deductible by payer.

    • Not taxable to recipient.

    • Don’t include child support payments received when you calculate your gross income to see if you're required to file a tax return.

  • Alimony payments (maintenance, spousal support)

    • If divorced on or before December 31, 2018:

      • Deductible by payer.

      • Taxable to the recipient.

      • Include alimony payments when you calculate your gross income to see if you’re required to file a tax return.

 

  •  

    • If divorced after December 31, 2018:

      • Not deductible by payer.

      • Not taxable to the recipient.

      • Don’t include alimony payments received when you calculate your gross income to see if you’re required to file a tax return.

  •  

    • If divorced prior to December 31, 2018 but agreement was/is modified after December 31, 2018, unless the parties specify to keep the old tax status:

      • Not taxable to recipient.

      • Not deductible to payer.  

IRS Publications

Tax Topic 452, Alimony

Publication 504, Divorced or Separated Individuals

 

TIP: The new tax law is in effect only until 2025, and it could change before then as well. Put language into your divorce agreements to avoid the parties having to return to court to modify a carefully constructed agreement based on a change in tax law.

 

We are certified divorce financial advisors and do not practice law. Our articles do not constitute legal or tax advice and are not intended to create an attorney-client relationship. Please remember to consult with your tax professional and divorce attorney regarding your unique circumstances. If you would like additional information or to discuss achieving your financial goals, please contact us.

 

Tax Cuts and Jobs Act of 2017

 

SEC. 11051. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.

 

    (a) In General.--Part VII of subchapter B is amended by striking

section 215 (and by striking the item relating to such section in the

table of sections <<NOTE: 26 USC 211 prec.>>  for such subpart).

 

    (b) Conforming Amendments.--

            (1) Corresponding repeal of provisions providing for

        inclusion of alimony in gross income.--

                    (A) Subsection (a) of section 61 is amended by

                striking paragraph (8) and by redesignating paragraphs

                (9) through (15) as paragraphs (8) through (14),

                respectively.

                    (B) Part II of subchapter B of chapter 1 is amended

                by striking section 71 (and by striking the item

                relating to such section in the table of

                sections <<NOTE: 26 USC 71 prec.>>  for such part).

                    (C) Subpart F of part I of subchapter J of chapter 1

                is amended by striking section 682 (and by striking the

                item relating to such section <<NOTE: 26 USC 681

                prec.>>  in the table of sections for such subpart).

            (2) Related to repeal of section 215.--

                    (A) Section 62(a) is amended by striking paragraph

                (10).

                    (B) Section 3402(m)(1) is amended by striking

                ``(other than paragraph (10) thereof)''.

                    (C) Section 6724(d)(3) is amended by striking

                subparagraph (C) and by redesignating subparagraph (D)

                as subparagraph (C).

            (3) Related to repeal of section 71.--

                    (A) Section 121(d)(3) is amended--

                          (i) by striking ``(as defined in section

                      71(b)(2))'' in subparagraph (B), and

                          (ii) by adding at the end the following new

                      subparagraph:

                    ``(C) Divorce or separation instrument.--For

                purposes of this paragraph, the term `divorce or

                separation instrument' means--

                          ``(i) a decree of divorce or separate

                      maintenance or a written instrument incident to

                      such a decree,

                          ``(ii) a written separation agreement, or

                          ``(iii) a decree (not described in clause (i))

                      requiring a spouse to make payments for the

                      support or maintenance of the other spouse.''.

                    (B) Section 152(d)(5) is amended to read as follows:

            ``(5) Special rules for support.--

                    ``(A) In general.--For purposes of this subsection--

 

[[Page 131 STAT. 2090]]

 

                          ``(i) payments to a spouse of alimony or

                      separate maintenance payments shall not be treated

                      as a payment by the payor spouse for the support

                      of any dependent, and

                          ``(ii) in the case of the remarriage of a

                      parent, support of a child received from the

                      parent's spouse shall be treated as received from

                      the parent.

                    ``(B) Alimony or separate maintenance payment.--For

                purposes of subparagraph (A), the term `alimony or

                separate maintenance payment' means any payment in cash

                if--

                          ``(i) such payment is received by (or on

                      behalf of) a spouse under a divorce or separation

                      instrument (as defined in section 121(d)(3)(C)),

                          ``(ii) in the case of an individual legally

                      separated from the individual's spouse under a

                      decree of divorce or of separate maintenance, the

                      payee spouse and the payor spouse are not members

                      of the same household at the time such payment is

                      made, and

                          ``(iii) there is no liability to make any such

                      payment for any period after the death of the

                      payee spouse and there is no liability to make any

                      payment (in cash or property) as a substitute for

                      such payments after the death of the payee

                      spouse.''.

                    (C) Section 219(f)(1) <<NOTE: 26 USC 219.>>  is

                amended by striking the third sentence.

                    (D) Section 220(f)(7) is amended by striking

                ``subparagraph (A) of section 71(b)(2)'' and inserting

                ``clause (i) of section 121(d)(3)(C)''.

                    (E) Section 223(f)(7) is amended by striking

                ``subparagraph (A) of section 71(b)(2)'' and inserting

                ``clause (i) of section 121(d)(3)(C)''.

                    (F) Section 382(l)(3)(B)(iii) is amended by striking

                ``section 71(b)(2)'' and inserting ``section

                121(d)(3)(C)''.

                    (G) Section 408(d)(6) is amended by striking

                ``subparagraph (A) of section 71(b)(2)'' and inserting

                ``clause (i) of section 121(d)(3)(C)''.

            (4) Additional conforming amendments.--Section 7701(a)(17)

        is amended--

                    (A) by striking ``sections 682 and 2516'' and

                inserting ``section 2516'', and

                    (B) by striking ``such sections'' each place it

                appears and inserting ``such section''.

 

    (c) <<NOTE: 26 USC 61 note.>>  Effective Date.--The amendments made

by this section shall apply to--

            (1) any divorce or separation instrument (as defined in

        section 71(b)(2) of the Internal Revenue Code of 1986 as in

        effect before the date of the enactment of this Act) executed

        after December 31, 2018, and

            (2) any divorce or separation instrument (as so defined)

        executed on or before such date and modified after such date if

        the modification expressly provides that the amendments made by

        this section apply to such modification.

 

 

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