Alimony Payments Post-TCJA: Are My Alimony Payments Deductible?

Unfortunately, divorce seems to be a more common theme in the United States as time goes on. 44% of all households contain at least one person who was previously divorced. One of the largest changes that the Tax Cuts and Jobs Act made was with regards to alimony payments, most of which are no longer deductible. However, as with almost everything in the law, there are exceptions.

Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony or separate maintenance payments for federal tax purposes. Certain alimony or separate maintenance payments are deductible by the payer spouse, and the recipient spouse must include it in income (taxable alimony or separate maintenance). However, for more recent divorcees the payments are most likely not deductible.

Taxpayers cannot deduct alimony or separate maintenance payments made under a divorce or separation agreement (1) executed after 2018, or (2) executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Alimony and separate maintenance payments you receive under such an agreement are not included in your gross income. This means that if your divorce was finalized prior to December 31, 2018, you can likely still deduct alimony payments to your previous spouse! It also means that if your divorce was finalized prior to 2018, but has since been modified, a taxpayer may not be able to deduct the alimony payments if the modification specifically prohibits the taxpayer making the alimony payments from claiming the deduction.

Recent divorcees should take note to these changes, especially if their divorce decree has been recently modified. They may be improperly deducting alimony payments without evening knowing it or they may be leaving money on the table by not claiming their deduction! The professionals at The Center for Financial, Legal, and Tax Planning are more than knowledgeable with regards to the aspects of the Tax Cuts and Jobs Act. Please contact us at (618) 997-3436 with any questions.