One of the biggest changes for divorce clients as a result of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) is the elimination of the deduction for payments of “alimony” starting January 1, 2019.
The deduction for alimony payments originally came into law more than 75 years ago with the passage of the Revenue Act of 1942. Since 1942, alimony payments made to a divorced spouse were taxable as income to that spouse and deductible by the payor spouse.
Family law attorneys and others sometimes use the terms spousal support, spousal maintenance, and alimony interchangeably. However, spousal support and spousal maintenance do not automatically qualify as alimony, and they must meet certain strict requirements under the Internal Revenue Code §71 in order to qualify including:
1. the payments must be required under a divorce or separate maintenance court order or written separation agreement;
2. the payments must be paid in cash;
3. the payments must stop after the death of the recipient;
4. the spouses may not live in same household; and
5. the divorce or separate maintenance court order may not designate the payment as anything other than alimony.
Now effective with the passage of the TCJA, the alimony deduction is eliminated for any divorce or separation instrument entered into after December 31, 2018, and the ex-spouse receiving the support payments is no longer be required to include the support payments in income
This also applies to a divorce or separation agreement executed on or before Dec. 31, 2018, and modified after December 31, 2018, as long as the modification:
• changes the terms of the alimony or separate maintenance payments; and
• states that the alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.
For more information about Alimony or Divorce, contact the Attorneys of
Supinka & Supinka, PC, at 724-349-6768
