The Rules for Alimony and Taxes in Tax Year 2019
The Tax Cuts and Jobs Act Eliminates This Rule Beginning in 2019
Starting in the 2019 tax year, alimony payments are no longer deductible—nor does the recipient have to report them as income. That's because the Tax Cuts and Jobs Act (TCJA), signed into law on December 22, 2017, eliminated the alimony deduction from the tax code from 2019 through 2025.
However, there are some exceptions.
The old rules still apply if your divorce agreement was executed in 2018 or earlier, but not if your divorce is finalized in 2019 or after.
In other words, there's no change in the federal income tax treatment for people who executed their divorce agreements before 2019. Alimony is still considered taxable income for the recipient, and it's tax deductible for the payer. However, for these payments to qualify as deductible alimony, payers must still meet certain requirements.
Reporting Alimony You've Received
If your divorce was final before 2019, the rules for reporting the income remain unchanged from previous years.
You must enter the full amount of any alimony you received on your Form 1040. For tax purposes, alimony includes what is sometimes called "separate maintenance"—income received if you're legally separated but not yet technically divorced. It does not include payments received under the terms of a temporary support order that might be in place while your divorce is pending.
You do not have to report any amounts you receive for child support. Child support is considered a non-taxable event. It’s not reported on your federal tax return, and the parent paying it cannot claim it as a tax deduction.
Reporting Alimony You've Paid
If your divorce was final before 2019, the rules for deducting your payments are also the same as in previous years.
If you paid alimony or separate maintenance to your ex-spouse, report the total amount on Form 1040 and enter your ex-spouse's Social Security number as well. This lets the IRS know who received the money so the agency can make sure it was declared as income.
Don't worry if you don't have your former spouse's Social Security number and they won't give it to you. You can notify the IRS of the problem and your ex can be charged with a $50 penalty for not supplying it to you.
You can claim alimony paid as an "above the line” deduction, and you don't have to itemize your deductions to claim it. You can claim both the alimony deduction and the standard deduction as well, or you can claim it and itemize other deductions.
Requirements for Deducting Alimony Payments
It probably doesn't come as much of a surprise that deducting alimony you've paid comes with a whole list of requirements and rules.
- You cannot file a joint tax return with your spouse, assuming you’re able to do so because your divorce isn't final yet.
- You must pay alimony in cash, which includes checks or money orders. If you give property or an asset in lieu of alimony, it’s not deductible. The IRS says this is a property settlement.
- Your divorce decree, separate maintenance decree, or written separation agreement cannot state that the payment is anything other than alimony. In fact, the document should clearly state that it is alimony or separate maintenance, not child support or an aspect of property settlement, because they don't count as alimony.
- You and your former spouse cannot live in the same household when you make the payments.
- You have no liability to continue making payments after the death of your former spouse. Ideally, your divorce decree or separate maintenance agreement should clearly state this as well.
The Recapture Rule
The Internal Revenue Service reserves the right to “recapture” your deductions if it determines that the payments were actually in the nature of property settlement or child support. This means that the amount of alimony you deducted must be added back to your income in future tax years, at which time it becomes taxable.
This might happen if the amount of your payments drops significantly within one or two years of your divorce, or if your alimony payments end entirely within three years of your divorce. It might also happen if payments end as soon as your youngest child leaves the nest. The IRS will review your situation to determine if the payments were indeed alimony or separate maintenance.
Specifically, your payments cannot decrease by $15,000 or more in the third year compared to what they were in the second year. Also, the last two years’ payments can’t “decrease significantly” compared to the payment in the first year.
No dollar amount is attached to the “decrease significantly” rule—it’s open to IRS interpretation. The idea is to prevent spouses from camouflaging property settlements as alimony. Property settlements are often completed within the first three years after divorce.
The IRS makes exceptions for circumstances beyond your control, such as if alimony is modified downward by the court due to an unforeseen financial crisis.
Tax laws change periodically, and you should consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice and is not a substitute for tax advice.