Can You Write Off Alimony on Your Taxes?

Alimony is a payment made to a spouse or former spouse under a divorce or separation agreement. The tax rules governing these payments have undergone significant changes, causing frequent questions. Whether you can deduct alimony payments depends on specific federal criteria, but the most important factor is the date of your legal agreement. The timing of a divorce or separation instrument is central to determining tax responsibilities for both the payer and the recipient.

Defining Alimony for Tax Purposes

For a payment to be considered alimony by the Internal Revenue Service (IRS), it must satisfy a set of requirements. The payment must be made in cash, including checks and money orders, but not as a transfer of property or the use of property. The payment must also be received by or on behalf of a spouse or former spouse under a formal divorce or separation instrument.

Several other conditions must also be met. The spouses cannot file a joint tax return with each other. If legally separated under a decree of divorce or separate maintenance, the spouses cannot be members of the same household when the payment is made. The legal instrument must not designate the payment as something other than alimony.

A distinction is made between alimony and child support. Child support payments are never deductible by the payer and are not taxable income for the recipient. The IRS has rules to prevent payments that are child support from being disguised as alimony. If a payment is scheduled to be reduced based on an event related to a child, such as them reaching a certain age, that portion is treated as child support.

There must be no liability to continue making payments after the death of the recipient spouse. If the payer is required to continue making payments to the recipient’s estate after their death, none of the payments made before or after death qualify as alimony. This rule ensures the payments are for support and not a disguised property settlement.

Tax Treatment Based on Agreement Date

The ability to deduct alimony on a federal tax return depends on the date your divorce or separation agreement was executed. The Tax Cuts and Jobs Act of 2017 (TCJA) altered the tax treatment of alimony, creating two different sets of rules based on this date.

For Agreements Executed Before 2019

If your divorce or separation agreement was executed on or before December 31, 2018, the previous tax rules apply. The spouse paying the alimony can deduct the payments from their income. This is an “above-the-line” deduction, meaning you do not need to itemize your deductions to claim it, which can lower your adjusted gross income (AGI).

The spouse who receives the alimony must report it as taxable income. The payments are included in their gross income and are taxed at their individual income tax rate.

For Agreements Executed in 2019 or Later

For any divorce or separation agreement executed on or after January 1, 2019, the rules were reversed. Under the new law, alimony payments are no longer deductible by the paying spouse. These payments are treated as a personal expense with no available tax deduction.

For the recipient, these alimony payments are no longer considered taxable income. They are received tax-free and do not need to be reported on the recipient’s federal income tax return. This change can influence financial negotiations during a divorce.

A consideration applies to modifications of pre-2019 agreements. If an agreement dated before 2019 is legally modified after 2018, the old tax rules continue to apply. The only exception is if the modification document explicitly states that the new TCJA rules should apply to the modified agreement.

How to Report Alimony Payments

For individuals with agreements executed before January 1, 2019, specific reporting procedures must be followed. The payer and recipient use Schedule 1 of Form 1040 to report these payments. These reporting requirements do not apply to agreements finalized in 2019 or later, as those payments are not deductible or taxable.

The spouse who paid the alimony reports the total amount paid for the year on Schedule 1 (Form 1040). They must also provide the recipient’s Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). The date of the original divorce or separation agreement must also be included, and failure to provide the correct SSN or ITIN can result in a penalty.

The spouse who received the alimony reports the total amount received as income on Schedule 1 (Form 1040). The recipient must also enter the date of the original divorce or separation agreement. It is their responsibility to provide their SSN or ITIN to the payer, and failing to do so can lead to a penalty.

State Tax Considerations

The TCJA’s changes to alimony taxation were federal, and not all states have adopted the same rules for their income tax systems. This can create a situation where the tax treatment of alimony differs between your federal and state returns. A payment that is not deductible on a federal return might still be deductible for state tax purposes.

This discrepancy means that in some states, a person paying alimony under a post-2018 agreement may not get a federal deduction but could still claim one on their state income tax return. Similarly, the recipient in such a state might have to include the alimony as taxable income on their state return, even though it is tax-free at the federal level.

Because the rules vary widely, individuals paying or receiving alimony must understand their specific state’s tax laws. The tax treatment of alimony is not uniform across the country, and what applies at the federal level may not apply at the state level. Taxpayers should consult their state’s tax agency to ensure they are complying with all applicable laws.