Alimony—also referred to as spousal support or maintenance—is a financial arrangement that arises from divorce or legal separation. It involves one spouse making regular payments to the other to help maintain their standard of living. From a tax perspective, however, not all alimony is treated the same. The taxability of alimony payments depends heavily on when the divorce agreement was finalized and how the payments are structured. Understanding what’s taxable and what’s not can help both payers and recipients avoid costly IRS issues.
In this detailed blog, we’ll explore the definition of alimony, the rules for tax treatment before and after 2019, what qualifies as alimony under IRS rules, what doesn’t, and how each party should report it on their tax returns.
1. What Is Alimony?
Alimony is a court-ordered or agreed-upon financial support that one spouse pays to the other following a divorce or separation. The purpose of alimony is to help the lower-earning spouse adjust financially after the separation, particularly when there is a significant income disparity between the ex-spouses.
Alimony is distinct from child support. While both involve payments following a divorce, only alimony (under certain conditions) may be taxable or deductible depending on the divorce agreement’s date.
2. The Key Tax Law Change: The Tax Cuts and Jobs Act of 2017 (TCJA)
The Tax Cuts and Jobs Act (TCJA), signed into law in December 2017, fundamentally changed how alimony is treated for tax purposes. The change applies to divorce and separation agreements executed after December 31, 2018:
- Before 2019: Alimony payments were taxable to the recipient and deductible for the payer.
- After 2018: Alimony is no longer taxable to the recipient nor deductible by the payer.
These rules have significantly altered financial negotiations in divorce settlements. However, it’s important to note that older divorce decrees may still follow the previous tax rules unless specifically modified after 2018.
3. Alimony Agreements Executed Before January 1, 2019
For divorce or separation instruments finalized on or before December 31, 2018, and not modified after that date:
- The payer: May deduct alimony payments on Form 1040, reducing their taxable income.
- The recipient: Must report alimony received as income and pay income tax on it.
In these cases, both parties must report the other’s Social Security Number to the IRS to ensure proper matching of the deduction and income.
4. Alimony Agreements Executed or Modified After December 31, 2018
For agreements entered into or substantially modified on or after January 1, 2019:
- The payer: Cannot deduct alimony payments on their tax return.
- The recipient: Does not include alimony as taxable income.
This new rule applies only to federal income tax. Some states may still treat alimony as taxable and deductible, so it’s important to review the laws in your state of residence.
5. What Qualifies as Alimony Under IRS Rules?
To be considered alimony (and deductible/taxable under pre-2019 rules), a payment must meet the following IRS criteria:
- The payment must be made under a divorce or separation instrument (court decree or written agreement).
- The spouses must not file a joint return with each other.
- The payment must be made in cash, check, or money order.
- The payment must not be designated as non-alimony in the instrument.
- Spouses must not live in the same household when the payment is made (if divorced).
- The obligation must end upon the recipient’s death (if specified).
- The payment must not be for child support or property division.
If these conditions are not met, the IRS may disqualify the payment from being treated as alimony, even if both parties label it as such.
6. What Is Not Considered Alimony?
The following types of payments are not considered alimony and therefore have different tax treatments:
- Child support payments
- Non-cash property settlements
- Payments to maintain jointly owned property
- Payments designated as not alimony in the legal agreement
- Voluntary payments not required by a court order or legal agreement
- Payments made after the recipient spouse’s death (unless specified otherwise)
These payments are typically not deductible by the payer or taxable to the recipient.
7. Reporting Alimony on Your Tax Return (Pre-2019 Agreements)
For the Payer:
Use Schedule 1 (Form 1040), Line 18a to deduct alimony payments. You must also provide the recipient’s Social Security Number on Line 18b.
For the Recipient:
Report the alimony income on Schedule 1 (Form 1040), Line 2a. This amount is included in your adjusted gross income (AGI) and subject to income tax.
Failure to report or provide accurate identification may result in penalties and disallowed deductions.
8. Modifications to Existing Agreements
If a pre-2019 agreement is modified after 2018 and the modification explicitly states that the new TCJA treatment applies, then:
- Alimony will no longer be taxable to the recipient.
- The payer cannot deduct the payments.
If the modification does not reference the TCJA change, then the original tax treatment continues to apply.
9. Recordkeeping and Documentation
Both the payer and recipient should retain documentation of alimony payments for at least three years after filing:
- Copies of the divorce or separation agreement
- Proof of payment (bank records, canceled checks, money orders)
- Dates and amounts of each payment
- Correspondence confirming receipt of payments
Having accurate records is crucial if the IRS audits your return or questions the tax treatment of alimony payments.
10. State Tax Considerations
Some states do not conform to the federal treatment of alimony under the TCJA. For example:
- California and New York: Continue to treat alimony as taxable/deductible for state purposes.
- Texas and Florida: Have no state income tax, so there’s no impact.
Always consult your state tax authority or a local tax professional to ensure you comply with both federal and state rules.
11. When to Seek Professional Help
Consider hiring a tax professional or family law attorney if:
- Your divorce decree includes complex financial arrangements
- You’re unsure whether a payment qualifies as alimony
- Your agreement was modified after 2018
- You’re dealing with cross-border alimony payments (international spouses)
- You’re planning to renegotiate or revise an existing decree
Professional advice can help you avoid costly mistakes, tax penalties, or rejected deductions.
Conclusion
Alimony is a significant financial and tax consideration for divorcing couples. Thanks to the Tax Cuts and Jobs Act, the rules surrounding alimony taxation changed dramatically after 2018. For agreements executed before 2019, alimony is generally taxable to the recipient and deductible by the payer. For newer agreements, these tax benefits and obligations no longer apply.
Whether you are paying or receiving alimony, it is essential to understand your responsibilities and rights under the law. By maintaining proper documentation, reviewing your legal agreements carefully, and consulting with a tax advisor, you can navigate the complexities of alimony taxation with confidence and compliance.
