Under the new Tax Cuts and Jobs Act (TCJA), alimony payments that were previously tax deductible will no longer be for all post-2018 divorce agreements.
Despite the change in federal law, some states will allow alimony payments to be deductible for state income taxes. In New York, alimony payments are still deductible from New York State and City taxable income, even if a divorce agreement came after 2018.
Despite the change in federal law, some states will allow alimony payments to be deductible for state income taxes. In New York, alimony payments are still deductible from New York State and City taxable income, even if a divorce agreement came after 2018.
If you are currently going through a divorce where spousal support is at issue, keep in mind the new tax law as you go through the process. The new policy will apply to alimony payments that are required under divorce or separation instruments that are: (1) executed after December 31, 2018 or (2) modified after that date. In other words, if you modify your agreement after December 31, 2018, the payment may no longer be deductible to you and may not be considered income to the recipient. If you are planning on modifying your agreement, make sure that you provide for your position in any changes that you are making.
For those of you who were able to have your divorce agreements signed prior to December 31, 2018, treatment of your alimony payments will remain status quo. If you signed your divorce agreement prior to December 31, 2018, here are 9 requirements that need to be fulfilled for alimony payments to be deductible:
- Your payments must be made pursuant to a written divorce or separation instrument. Qualifying “instruments” include divorce decrees, separate maintenance decrees, and separation agreements.
- Make sure that your tax return includes the payee’s Social Security Number. This is required in order to include it as a deduction.
- If your divorce or separation agreement expressly notes that the payments are not alimony and designates the payments for another purpose, then it does not qualify.
- As per your divorce or separation agreement, your payments must be made to or on behalf of your spouse or ex-spouse. It is fine if the alimony payments are through a third party such as your attorney.
- If you are filing a joint return with your ex-spouse, then your alimony payments will not qualify as deductible.
- If your ex-spouse has passed away and there remains a requirement to continue to make alimony payments to his or her estate and/or beneficiaries, then the alimony payments are not deductible. There can be no obligation to continue alimony payments in order to qualify as a deduction.
- Alimony payments must be made in cash or cash equivalent (e.g. credit card, check, or money order) to qualify as deductible.
- Child support doesn’t count. Payments made as child support aren’t deductible for the payer nor are they taxed as income to the recipient.
- Payments or services that are part of property settlements are not considered alimony payments.
To learn more about how Tax Cuts & Jobs Act may affect your filing, consider seeking advice from a tax professional ahead of the April 15 deadline. If you need legal assistance with your divorce, please contact us at Weisman Law Group, P.C. at (516)-256-7737, email us at info@weismanpc.com, or schedule a free consultation with the form below.
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