Is Alimony Taxable in New York State?

In New York, payments from one spouse to another during a divorce are known as spousal maintenance, or alimony. The tax rules governing these payments have undergone substantial changes, creating a frequent source of confusion for both the person paying and the person receiving. Understanding the correct tax treatment is dependent on when the legal agreement mandating the payments was finalized.

Defining Alimony for Federal and New York Tax Purposes

For a payment to be considered alimony for tax purposes, it must meet specific criteria established by the Internal Revenue Service (IRS). New York State’s tax law aligns with the federal definition, so these requirements apply for both federal and state income tax.

• Payments must be made in cash, which includes checks or money orders, and be received by or on behalf of a spouse or former spouse.
• Payments must be required under a divorce or separation instrument, such as a divorce decree, a written separation agreement, or another lawful court order.
• The legal instrument must not designate the payment as something other than alimony.
• The spouses may not be members of the same household when the payments are made.
• There can be no obligation for the payments to continue after the death of the recipient spouse.
• The payment cannot be classified as child support, as child support payments have their own distinct and separate tax rules.

Tax Rules for Agreements Executed Before 2019

For divorce or separation agreements executed on or before December 31, 2018, the spouse making the alimony payments is permitted to deduct the full amount from their income. This is an “above-the-line” deduction, meaning it reduces the payer’s adjusted gross income (AGI) without the need to itemize deductions.

Conversely, the spouse receiving the payments must report them as taxable income. New York State’s tax law conforms to this federal treatment for these older agreements. The payer can also deduct the alimony on their New York State income tax return, and the recipient must include the alimony as taxable income on their state return.

These rules remain in effect for the life of the agreement unless both parties formally agree to modify their original divorce or separation instrument to adopt the newer tax rules. Without such a modification, the original tax treatment continues to apply indefinitely.

Tax Rules for Agreements Executed After 2018

The Tax Cuts and Jobs Act (TCJA) of 2017 changed the federal tax treatment of alimony. For any divorce or separation agreement executed on or after January 1, 2019, alimony payments are no longer deductible by the spouse who pays them. For the recipient, these payments are no longer considered taxable income at the federal level.

However, New York State has not adopted these federal changes. For New York State income tax purposes, the treatment of alimony remains the same regardless of when the agreement was executed. The paying spouse can still deduct the alimony payments on their state tax return, and the receiving spouse must still report the payments as taxable income.

How to Report Alimony on Tax Returns

For individuals with agreements executed on or before December 31, 2018, the reporting is consistent for federal and state returns. The payer must report the total alimony paid for the year on their federal return to claim the deduction and must also enter the recipient’s Social Security Number (SSN). The recipient must report the same payments as income, providing the payer’s SSN, and this information is then carried over to the New York State return.

For agreements executed on or after January 1, 2019, the payments are not reported by either the payer or the recipient on the federal return. Because New York’s tax law differs from the federal rule, adjustments must be made on the New York State tax return. The spouse paying alimony must take a subtraction modification on their New York return to deduct the payments from their state income. Conversely, the spouse receiving alimony must make an addition modification on their New York return to include the payments as taxable income.