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Can alimony payments be deducted on your income tax return?

by | May 20, 2021 | Firm News |

One major issue which must be addressed in a Florida divorce involves alimony. In simple terms, alimony is money paid by one ex-spouse to the other to assist with that person’s support and living needs after the divorce. Prior to December 31, 2018, alimony payments were deductible by the paying party and were treated as taxable income to the receiving party. Often when entering into a marital settlement agreement, the parties or the court would take into account the tax consequences of the alimony.

Then Congress enacted the Tax Cuts & Jobs Act of 2017. As a result of that legislation, the IRS clarified that, in certain situations, alimony is no longer deductible by the payer spouse and is not taxable as income to the payee spouse.

Beginning Jan. 1, 2019, alimony payments are not deductible from the income of the payer spouse, nor are they includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018.

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.

On the other hand, generally alimony or separate maintenance payments are deductible from the income of the payer spouse and includable in the income of the receiving spouse, if made under a divorce or separation agreement executed on or before Dec. 31, 2018, even if the agreement was modified after December 31, 2018, so long as the modification is not one described in the preceding paragraph above. Based on these provisions, making changes to a pre-December 31, 2018 divorce agreement or decree must ben done very carefully.

Aside from the above exception involving modifications, alimony paid pursuant to pre-December 31, 2018 divorce decrees remains the same. After for divorce decrees after December 31, 2018, it is a whole new ballgame.

While the income tax treatment of alimony is a matter of federal law and is now controlled by the procedures outlined above, entitlement to alimony and the calculation of the amount to be awarded are matters of state law. In Florida, those matters are addressed in Section 61.08, Fla. Stat. and the caselaw applying that statute. If you are going through a divorce and want to know if you’re entitled to alimony and if so, in what amount, you should consult an experienced family law attorney.

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