What Is Maintenance Income and How Is It Taxed?

Maintenance income, often referred to as alimony or spousal support, represents financial provisions made by one former spouse to another following a divorce or legal separation. Its primary purpose is to provide financial assistance to a spouse who may have a lower earning capacity or needs support to maintain a reasonable standard of living after the dissolution of the marriage. This financial arrangement helps address economic disparities that can arise when a couple separates.

Defining Maintenance Income

Maintenance income, widely known as alimony or spousal support, is a payment from one spouse to another under a divorce or separation agreement. To qualify as maintenance for federal tax purposes, several specific criteria must be met.

The payments must be made in cash, including checks or money orders, and received by or on behalf of a spouse or former spouse.
These payments must be stipulated in a divorce or separation instrument, such as a divorce decree, a separate maintenance decree, or a written separation agreement.
The spouses cannot file a joint tax return or be members of the same household when payments are made, especially if legally separated.
There must be no obligation to make any payment after the death of the recipient spouse.
The agreement must not designate the payment as non-includable in the recipient’s gross income or non-deductible by the payer.
If a payment is tied to a child’s life event, it generally cannot be claimed as maintenance.

Temporary alimony, also known as pendente lite support, is awarded while divorce proceedings are ongoing to cover immediate expenses like housing and legal fees. Rehabilitative alimony aims to support a spouse while they acquire the necessary education, training, or skills to become self-sufficient, typically for a specific duration. Permanent alimony, though less common, is generally reserved for long-term marriages where one spouse has limited earning potential due to age, health, or other factors, continuing until the recipient’s remarriage or death.

Tax Treatment of Maintenance Payments

The federal income tax treatment of maintenance payments underwent a significant change due to the Tax Cuts and Jobs Act (TCJA) of 2017. The tax implications depend entirely on the date the divorce or separation instrument was executed. This distinction is important for both the payer and the recipient of maintenance income.

For divorce or separation agreements executed on or before December 31, 2018, the traditional tax rules apply. Under these rules, maintenance payments are generally deductible by the payer spouse from their gross income. This deduction is an “above-the-line” deduction, meaning it reduces the payer’s adjusted gross income and does not require itemizing deductions. Conversely, for agreements executed during this period, the recipient spouse must include the maintenance payments in their gross income as taxable income. The recipient must report this income on their tax return and provide their Social Security Number or Individual Taxpayer Identification Number to the payer.

A significant shift occurred for divorce or separation instruments executed after December 31, 2018. The TCJA eliminated the federal income tax deduction for maintenance payments for the payer spouse. This means that payers can no longer deduct these payments on their federal income tax returns.

Correspondingly, maintenance payments received under agreements executed after this date are no longer considered taxable income for the recipient spouse. Recipients do not need to report these amounts as income on their federal tax returns. This change effectively treats maintenance payments as a wealth transfer rather than income for federal tax purposes.

An important consideration involves agreements executed before 2019 that are later modified. If a pre-2019 agreement is modified after December 31, 2018, the new TCJA rules will apply only if the modification explicitly states that the repeal of the deduction for maintenance payments applies to that modification. If the modification does not include this specific language, the original tax rules (deductible for payer, taxable for recipient) continue to apply.

Distinguishing Maintenance from Other Financial Payments

Maintenance income serves a distinct purpose in post-divorce financial arrangements and differs significantly from other financial payments such as child support and property division. Child support is a separate financial obligation intended solely for the care and upbringing of children.

Unlike maintenance, child support payments are generally not taxable to the recipient and are not deductible by the payer for federal income tax purposes. If a divorce or separation instrument includes both maintenance and child support, and the payer does not make the full required payment, federal tax rules typically prioritize child support, meaning payments are first applied to child support obligations before any remaining amount is considered maintenance.

Property division, or property settlement, involves the division of assets and debts accumulated during the marriage between the divorcing spouses. This process is generally considered a non-taxable event at the time of transfer. For instance, if one spouse transfers a share of a retirement account or real estate to the other, this transfer itself does not trigger immediate income tax for either party. Property division is fundamentally different from maintenance as it deals with the distribution of existing marital wealth rather than ongoing financial support. While maintenance aims to provide a continuous stream of income, property division is typically a one-time or structured transfer of assets.

Establishing and Modifying Maintenance Agreements

Maintenance agreements are formally established through various legal documents, typically as part of the divorce or legal separation process. These arrangements are often detailed within a marital settlement agreement, a court order, or a divorce decree. The terms and conditions, including the amount and duration of payments, are legally binding once approved by the court. Parties negotiate these terms, or a court determines them based on relevant factors.

When determining maintenance, courts consider numerous factors to establish an equitable arrangement. Common considerations include the length of the marriage, as longer marriages often lead to more substantial support. The earning capacity of each spouse and their ability to become self-supporting are also significant factors. Courts evaluate the standard of living enjoyed during the marriage, the age and health of each spouse, and their respective assets and debts. Any contributions made by one spouse to the other’s education or career advancement may also influence the determination.

Maintenance agreements are not always permanent and can be modified if there is a substantial change in circumstances. Examples of such changes include an involuntary job loss or a major pay cut for the payer, or a substantial increase in the recipient’s income. Remarriage of the recipient spouse commonly leads to the termination of maintenance obligations in most jurisdictions. Other factors that may warrant modification include serious illness or disability affecting earning capacity, or the good-faith retirement of the paying spouse. Any modification requires a formal request to the court, demonstrating the material change that justifies an adjustment to the existing order.