Spousal support, also known as alimony, is a financial obligation that one spouse (payor) may be required to provide to the other spouse (payee) following separation or divorce. In some cases, these payments can be deducted from the payor’s gross income for federal income tax purposes.
In this article, we will take an in-depth look at spousal support deductions, including the requirements and limitations for such deductions, changes in the law that may affect them, and the role of child support in these calculations.
What Are Spousal Support Deductions?
Spousal support deductions refer to the ability of a spouse who is required to make support payments to deduct these payments from their gross income for federal income tax purposes.
By reducing the payor’s taxable income, these deductions can potentially lower the overall tax liability. However, recent changes in tax laws and Internal Revenue Service (IRS) regulations have impacted the eligibility for and scope of these deductions.
When Can a Spouse Deduct Spousal Support Payments From Federal Income Taxes?
Spousal support payments can be deducted from the payor’s gross income if the payments were made as part of a divorce order or a separation agreement. However, the eligibility for such deductions has been significantly impacted by recent changes in tax laws, particularly the 2017 Tax Cuts and Jobs Act.
Under What Circumstances May Spousal Support Payments Be Deducted?
Before the 2017 Tax Cuts and Jobs Act, spouses could generally deduct alimony or separate maintenance payments made as part of a separation or divorce agreement. However, the Act has restricted the scope of these deductions.
Under current law, a spouse cannot deduct alimony or separate maintenance payments if:
- The divorce or separation agreement was entered into after 2018.
- The agreement was made before 2019, but it was later modified to state that the repeal of deductions applies to the modified agreement.
- You have finalized your divorce but still live with your former spouse. You can only claim a deduction on alimony paid prior to January 1, 2019, when you are living in different residences.
What Is Considered an Alimony or Support Payment?
Not all payments made to a spouse or former spouse qualify as alimony or separate maintenance payments.
To be considered as such (and therefore be deductible), the following requirements must be met:
- The alimony or separate maintenance payment must be made under an agreement made on December 31, 2018, or earlier;
- The spouses are not currently filing a joint tax return;
- The payment must be in the form of money, including actual cash, money orders, and checks;
- At the time of payment, the couple does not reside in the same household;
- The legal obligation to make the payment must terminate before the spouse receiving the payments dies; and
- The payment is not part of a property settlement order.
Are Child Support Payments Deductible?
Child support payments are not deductible from a spouse’s income. These payments are not considered alimony or support payments for tax purposes.
Suppose a divorce or separation decree orders payment of both alimony and child support and the payor is only able to make a partial payment. In this case, the partial payment is first applied to child support. Any remaining amount is applied to alimony and is tax-deductible.
When Are Payments Not Considered to Be Alimony or Separate Maintenance Payments?
Certain payments are not treated as alimony or separate maintenance payments under the law and, therefore, cannot be deducted from income.
- Payments made under a divorce or separation agreement entered into on January 1, 2019, or later;
- Property settlements that are not in the form of cash;
- Income that is your spouse’s share of community property; and
- Payments that are voluntary (not part of a divorce or separation agreement).
Do Changes in the Law Affect My Ability to Deduct Spousal Support?
Yes, changes in the law have significantly impacted the ability to deduct spousal support payments.
Under current law, separate maintenance payments and alimony payments cannot be deducted from the income of the spouse making the payment if the payments are made under an agreement made on January 1, 2019, or later. However, alimony or separate maintenance payments are deductible if they were made as part of an agreement made on December 31, 2018, or earlier.
Additional Considerations and Examples
Tax Implications for the Recipient Spouse
While the payor spouse may be able to deduct spousal support payments from their taxable income (if eligible), the recipient spouse must report these payments as taxable income, potentially increasing their tax liability.
Lump-sum spousal support payments are generally not deductible for the payor spouse or taxable for the recipient spouse. However, suppose a lump-sum payment is made as part of a court-approved, written agreement specifying the payment as deductible alimony. In that case, the payment may be tax-deductible for the payor and taxable for the recipient.
Example: Deductible vs. Non-deductible Spousal Support Payments
John and Jane divorced in 2018, and their divorce agreement, finalized on December 30, 2018, required John to pay Jane $2,000 per month in spousal support. As the agreement was made before December 31, 2018, John can deduct these payments from his gross income for tax purposes, and Jane must report the payments as taxable income.
In contrast, Mike and Mary divorced in 2019, with their divorce agreement requiring Mike to pay Mary $2,500 per month in spousal support. Since their agreement was made on or after January 1, 2019, Mike cannot deduct these payments from his gross income, and Mary does not have to report the payments as taxable income.
Do I Need a Lawyer for Help With Deductions for Spousal Support?
If you have made spousal support payments and are unsure whether these payments can be deducted from your income, it is advisable to consult a lawyer. An experienced alimony lawyer can advise you on which payments can and cannot be deducted and can represent you at hearings and court proceedings.
In addition to a family lawyer, you may wish to seek the advice of a tax attorney. The 2017 Tax Cuts and Jobs Act introduced several changes to tax law, and an experienced tax lawyer can help you understand how these changes affect your spousal support tax obligations.
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Use LegalMatch today to find the right lawyer for your case. You can give yourself peace of mind knowing that you have qualified legal support on your side.