Like most any other decisions impacting your family or business, divorce has tax consequences. The federal government made changes to the tax law that will impact spousal support for couples who got divorced in 2019 or later.
Tax Cuts and Jobs Act
This law changed the taxation for spousal support, commonly referred to as alimony, for divorces beginning in 2019. Under the pre-2019 taxation rules, spouses paying alimony could deduct those payments on their Form 1040. Recipients had to declare that support as income if payments were made in cash, checks or money orders. These requirements, however, will continue for spouses whose divorces were finalized and spousal support was ordered before 2019.
Different tax rules govern divorces finalized after Dec. 31, 2018. Spouses paying spousal support may not deduct those payments from their taxes. Recipients no longer have to declare that support as income.
For divorces finalized before Dec. 31, 2018, divorced couples still must comply with certain IRS rules governing deductibility and reporting support as income:
- The divorced couple cannot continue to file a joint return with each other.
- Support payments should be paid in cash, checks or money orders.
- Payments for an ex-spouse must be made as part of a divorce or separation instrument.
- The divorce or separation instrument cannot designate payments as not being spousal support.
- The spouses may not be members of the same household when the payments are made if the spouses are legally separated under a divorce or separate maintenance decree.
- The spousal support payments of cash or property must stop after the recipient spouse’s death.
- Payments may not be treated as child support or a property settlement.
Spousal support and its taxation are only one of the issues that affect divorce. An attorney can help a spouse review options that apply to their situation and pursue their rights.