What are the tax laws for alimony?

There have been some recent changes in alimony tax laws. They can be a little confusing because there is a grandfather clause that means not everyone’s situation will be the same.

The IRS explains that you also need to make sure the payments you receive are alimony under the tax code, which can differ from what the court papers say.

Defining alimony

To be alimony under the tax code, you must pay in cash, not have a requirement to pay after the death of the recipient, file a separate return from your former spouse, not be members of the same household and have an order for the payment from the court.

Alimony cannot be child support or part of a property settlement. It cannot include non-cash assets or be money you pay or receive for the upkeep of property. Also, it does not include any voluntary payments.

Understanding taxation

If you have a divorce decree ordered after 2018 or you have a modification to your divorce decree that repealed the deduction for alimony, then you will not include your alimony payments on your taxes because the law changed in 2018. However, if your decree was from before 2018, then you can claim payments on your taxes.

If you pay alimony, you can deduct it as an expense. If you receive alimony, you can claim it as income. You will use Form 1040 to make these claims on the Schedule 1 form. You must have your former spouse’s Social Security number to include payments on your taxes as income or a deduction.

 

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