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Going through a divorce brings many challenges, including changes to your tax situation. When you’re looking to file your taxes after a divorce, you may have a lot of questions and concerns. Read on to find out what alimony is and how it may affect you.
What is alimony?
Alimony is meant to ensure that both parties have the resources to meet their individual needs. It isn’t obligatory and can be imposed permanently or temporarily (you can read more about that below).
According to the IRS, a payment is alimony if all the following requirements are met:
- The spouses don't file a joint return with each other;
- The payment is in cash (including checks or money orders);
- The payment is to or for a spouse or a former spouse, made under a divorce or separation agreement;
- The spouses aren't members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);
- There's no liability to make the payment (in cash or property) after the death of the recipient spouse;
- The payment isn't treated as child support or a property settlement; and
- The divorce or separation agreement does not designate the payment as not includible in gross income of the payee spouse, and not allowable as a deduction to the payor spouse.
How is the amount of alimony determined?
Each state has its own rules and regulations. The determining factors include:
- The length of time married;
- How long the couple was separated;
- Future financial potential of each spouse;
- The ages of the ex-spouse;
- The income of the ex-spouses.
If there is a significant income difference, the judge will consider this.
Is alimony taxable?
Alimony awards made after December 31, 2017, are no longer taxable for the recipient or deductible for the payer.
The IRS states that you can't deduct alimony or separate maintenance payments made under a divorce or separation agreement executed after 2018. Alimony requirements executed before 2019, but later changed, are also not tax deductible. It’s important to note that this is only if the modification expressly says the repeal of the deduction for alimony payments isn’t affected. This is complex, and it’s best to work with professionals on your individual situation.
Alimony and separate maintenance payments you receive under such an agreement are not included in your gross income. This is a departure from previous alimony regulation.
Deductible alimony payments
If you entered a divorce or separation agreement before the dates outlined above, the alimony payments would be deductible for the payer. It would have to be reported as taxable income by the recipient.
Where to report alimony on tax returns
Before we dive into where to report, the dates and nuances of your divorce agreement are crucial when considering this. A Tax Pro can help you with your individual situation to ensure that the proper steps are taken.
For cases settled after the Tax Cuts and Jobs Act (TCJA), if you paid amounts that are considered taxable alimony or separate maintenance, you may deduct from your income the amount of alimony or separate maintenance you paid as an adjustment to income, even if you don't itemize your deductions.
Deduct alimony or separate maintenance payments on Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors with Schedule 1 (Form 1040), or Additional Income and Adjustments to Income as an attachment.
You must enter the Social Security number (SSN) or individual taxpayer identification number (ITIN) of the spouse, or former spouse, receiving the payments, or your deduction may be disallowed, and you may have to pay a $50 penalty.
If you received amounts that are considered taxable alimony or separate maintenance, you must include the amount you received as income. Report alimony received on Form 1040 or Form 1040-SR, attaching Schedule 1 (Form 1040), or on Form 1040-NR, U.S. Nonresident Alien Income Tax Return, attaching Schedule NEC (Form 1040-NR)). You must provide your SSN or ITIN to the spouse or former spouse making the payments, otherwise you may have to pay a $50 penalty.
Types of alimony
There are various types of alimony. When most people think of spousal support, they are thinking of permanent alimony. This is the amount awarded after a divorce is finalized, paid on a regular, recurring basis.
Permanent alimony is not always for an entire lifetime. Often the length of marriage or cohabitation dictates the timeline.
On the other hand, temporary alimony is usually paid while a divorce proceeding is still ongoing, and stops when the divorce is finalized, often replaced with permanent alimony. Temporary alimony can sometimes also be granted in cases of legal separation.
In some states, temporary alimony requires very little by way of in-depth assessment of a couple’s property, assets, and debts prior to a formal divorce proceeding or prior to a judge granting the temporary spousal support.
Rehabilitative alimony is used in the case where an ex-spouse is not self-sufficient. A judge may order payment while the ex-spouse is looking for a job or in school to improve future employment opportunities. This is typically for a fixed period.
Reimbursement alimony is intended to help level the playing field between ex-spouses. A judge, for example, can require regular payment to reimburse all or some of tuition costs paid by a spouse.
Finally, sometimes a spouse doesn’t want any property or assets from a marriage, so instead they receive a one-time lump sum in lieu of property.
Non-deductible alimony payments
There are cases and types of divorce payments that don’t count as alimony, including:
- Child support;
- Non-cash property settlements;
- Voluntary payments not required under a finalized divorce decree;
- Payments to maintain property of the alimony payer.
Because every case is different, always talk to your Tax Pro about any specific questions you may have.
If a person is paying alimony and child support, but doesn’t fully complete both payments, the money would go toward child support first for tax purposes.
Alimony versus child support
Though sometimes seen as interchangeable, child support and alimony are two different things.
The main difference is the intended use of the money. An ex-spouse or co-parent pays child support to maintain and support the needs of a child, including food, medical care, clothing, housing, and other basic necessities. These payments are obligatory, and solely meant for a child until reaching adulthood or until the court mandates.
Each state is required by federal law to have guidelines for calculating child support payments.
Community property states
It’s important to note that community property states view marriage as a partnership where both spouses equally share property and assets they acquire after the wedding. These include:
- Louisiana, New Mexico,
Payments to maintain your spouse’s portion of community property are not considered alimony. There are other complexities to discuss depending on the state in which you reside. You can discuss this with your Tax Pro.
Going through a divorce can be one of the most confusing and stressful experiences in someone’s life. We are here to help you with any tax questions you may have this year and the years to come. Find a Tax Pro near you.
About the Author
Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.