What Happened to the Alimony Tax Deduction?

The recently enacted Tax Cuts and Jobs Act makes significant changes to the alimony tax deduction. However, the changes to the alimony tax deduction only apply to spousal support orders that are issued on or after January 1, 2019. This blog discusses the alimony tax deduction prior to the enactment of the Tax Cuts and Jobs Act and how the new rules affect divorce cases.

What Is the Alimony Tax Deduction?

Before implementation of Tax Cuts and Jobs Act reforms, a taxpayer who was required to make alimony payments was allowed to deduct those payments from the adjusted gross income for federal income tax purposes. A taxpayer who received alimony payments was then required to report the receipt of alimony as taxable income on their federal tax returns.

The rationale behind the alimony tax deduction was that individuals who paid alimony did not have an opportunity to benefit from that part of their “income.” Any amount that was allocated for spousal support payments was basically diverted to the alimony recipient. The alimony payor was essentially a conduit for income that benefited the recipient. As a result, the alimony tax deduction placed the tax liability on the alimony recipient and allowed the payor to deduct payments from their taxes.

How Do the New Rules Affect My Case?

After the passage of the Tax Cuts and Jobs Act, taxpayers who paid alimony are no longer allowed to deduct such payments from their adjusted gross income. However, taxpayers who received alimony are no longer required to report alimony receipts on their federal income tax returns. As a result, the tax liability for people who pay alimony will increase as they are essentially held responsible for paying taxes for the amounts they pay their spouses in alimony.

However, these reforms apply only to spousal support orders that have been issued on or after January 1, 2019. Importantly, post-judgment modifications of spousal support orders that are issued on or after New Years Day, 2019 are subject to the new rules even if the original alimony order was made before then.

Contact O’Neil Wysocki, P.C. for Legal Counsel

If you are going through a divorce involving spousal support, you stand to benefit from the professional legal advice of an experienced attorney at O’Neil Wysocki, P.C. We have years of experience handling divorce cases with various legal issues, including the negotiation, establishment, and enforcement of spousal support orders. You can count on our legal team to provide you with top quality legal counsel to make sure you and your family have a skilled advocate to promote your legal rights and interests.