How Does the IRS Tax Alimony?

How Does the IRS Tax Alimony?

What are Alimony Payments?

Alimony is financial assistance paid to one spouse from another spouse after their divorce is finalized. One spouse must request alimony from the court to receive it. Judges do not grant alimony unless a spouse specifically asks for it in the initial divorce filing.

The judge in a divorce case typically considers the following factors when determining if alimony is warranted:

  • Whether one spouse can afford alimony payments.
  • The standard of living while married.
  • Income sources of both spouses.
  • Physical and mental health of both spouses.
  • Amount of time married.
  • Needs of dependent children.

What are Examples of Divorce Payments That the IRS Does not Consider Alimony?

The IRS does not consider these payments as alimony:

  • Child support.
  • Property settlements, including cars, real estate and other valuables.
  • Use of property by one divorced spouse that belongs to the other divorced spouse.
  • Voluntary cash payments from one ex-spouse to the other.

Is Alimony Tax Deductible for the Paying Spouse?

Before the implementation of the Tax Cuts and Jobs Act, alimony was tax deductible for the spouse paying and taxable income for the spouse receiving.

Currently, alimony is not tax deductible for the paying spouse if the divorce happened after 2018. In addition, the person receiving alimony does not have to report payments for taxes if they were divorced after January 1, 2019.

If you were divorced before 2019, you can deduct alimony payments from taxable income if you meet the following requirements:

  • Your alimony payments were made as cash, by check, or by money order.
  • Your final divorce settlement cannot say that payments made by you to your ex-spouse are anything but alimony payments.
  • You and your ex-spouse cannot live together when you are making alimony payments.

How Do You Report Alimony Payments Made on Your Tax Return?

If your divorce was finalized before 2019 and you are paying alimony, you must report the total yearly amount of alimony you paid for that tax year on Schedule 1 (Additional Income and Adjustments to Income), line 18a.

You will also need to put your ex-spouse’s social security number and the exact date the divorce became final on the Schedule 1 tax form.

Is Alimony Taxable Income for the Receiving Spouse?

No, as long as the receiving ex-spouse was divorced on or after January 1, 2019. Alimony recipients who were divorced before that date, and who are still receiving alimony, must report the amount of alimony they receive as taxable income.

How Do You Report Alimony Payments Received on Your Tax Return?

If your divorce was finalized before 2019 and you receive alimony payments, you must report the total yearly alimony amount received on Schedule 1, line 2a. You will also need to include your ex-spouse’s SSN and the date you finalized your divorce.

What Happens When Alimony Payments Before January 1, 2019 are Modified?

Modifying a pre-2019 divorce settlement to amend alimony payments results in the updated settlement following current IRS tax regulations for alimony.

For example, if a spouse was ordered to pay $1,000 per month in alimony to an ex-spouse they divorced in 2018, and the divorce settlement is modified in 2023 to change the alimony amount to $500 per month, then the payer can no longer claim any alimony as a tax deduction and the recipient does not have to report any alimony as income.

Which Spouse is Responsible for a Tax Debt When You Divorce After Filing a Joint Return?

Spouses who file joint tax returns while married to each other are liable for tax debts incurred during their marriage. Following a divorce, the IRS will come after both for past tax debts.

Per IRS rules, divorce does not eliminate the responsibility of ex-spouses who owe a joint tax debt, nor does it move the full responsibility from one spouse to the other.

The IRS does offer a program called Separation of Liability Relief for divorced spouses who filed jointly and have tax debts due to certain errors on their returns.

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