But most taxpayers who got divorced earlier than 2019 can claim a deduction for alimony payments they make and must report alimony payments they receive as taxable income. The Tax Cuts and Jobs Act (TCJA) eliminated the alimony deduction from the tax code from 2019 through 2025 for most divorce agreements and decrees entered into during that time. Taxpayers can still claim the deduction and must still report the payments for most divorces entered into before Dec. 31, 2018.
Alimony Tax Rules for Divorces Before 2019
The old tax rules still apply if your divorce agreement was executed or your divorce decree was issued in 2018 or earlier. In these divorces, alimony is still considered taxable income for the recipient, and it’s still tax deductible for the payer under the same rules. Payers must still meet certain requirements for these payments to qualify as deductible alimony.
Reporting Alimony You’ve Received as Income
Enter the full amount of any alimony you received on line 2a of Schedule 1 with your Form 1040 to report alimony you received as income if you were divorced before 2019. Alimony includes payments that are sometimes called “separate maintenance.” This is income received when you’re legally separated but not yet technically divorced. Alimony does not include:
Child support Non-cash property settlements Payments that represent your spouse’s part of community property income Use of the payer’s property or payments for the property’s upkeep Voluntary payments that aren’t required by the divorce decree or agreement
The total of Part I, “Additional Income,” of Schedule 1 transfers to line 8 of the Form 1040.
Claiming Alimony You’ve Paid as a Deduction
If you were divorced before 2019, report the total amount you paid on line 19a of Schedule 1, then transfer the total from this section, “Adjustments to Income,” to line 10 of the Form 1040. Schedule 1 also asks you to enter your ex-spouse’s Social Security number, as well as the date of your divorce decree or agreement, in order to confirm that you’re still entitled to claim the deduction. Entering your ex’s Social Security number lets the IRS know who received the money so the agency can make sure the individual declared it as income. You don’t have to itemize to claim this alimony deduction. You can claim it and itemize other deductions, or you can claim both the alimony deduction and the standard deduction instead.
Requirements for Deducting Alimony Payments
You’re able to deduct alimony from your taxable income if your divorce was finalized before 2019, as long as you meet certain requirements and rules:
You must pay alimony in cash, which includes checks or money orders. If you give property or an asset in lieu of alimony, it’s not deductible. The IRS considers that a property settlement.Your divorce decree, separate maintenance decree, or written divorce agreement can’t state that the payment is anything other than alimony. The document should clearly state that it is alimony or separate maintenance, not child support or an aspect of property settlement because these don’t count as alimony.You and your former spouse can’t live in the same household when you make the payments.You have no liability to continue making payments after the death of your former spouse. Ideally, your divorce decree or separate maintenance agreement should clearly state this as well.
The Alimony Recapture Rule
The IRS created the Alimony Recapture Rule to discourage divorcing couples from trying to disguise property settlement payments as alimony in order to take advantage of alimony’s tax benefits. Property settlements are often completed within the first three years after the divorce. Even if that’s not your intent, the rule can still apply. In a nutshell, the rule penalizes the alimony payer if alimony payments fall significantly within the first three years after a separation or divorce. Your payments can’t decrease by $15,000 or more in the third year, compared to what they were in the second year, and the last two years’ payments can’t “decrease significantly” compared to the payment in the first year. The IRS reserves the right to “recapture” your deductions if it determines that the payments you made don’t qualify as alimony. This means that the amount of alimony you deducted must be added back to your income in future tax years, at which time it becomes taxable.
Example of the Alimony Recapture Rule
Let’s say a woman pays her ex-husband $20,000 in alimony in the first year after a divorce, but the next year only pays him $2,000. She claims a deduction for the payments each year. This raises suspicion that the first payment might have actually only been a way to share a marital asset, but still give the woman a tax benefit. According to the recapture rule, the $20,000 that was deducted can be converted into $20,000 of additional taxable income for the woman in year three. And the $20,000 that the ex-husband had to claim as taxable income can be used as a tax deduction in the third year. A number of circumstances might trigger this rule. For a number of legitimate reasons, the amount of your payments could drop significantly within one to two years of your divorce or end entirely within three years of your divorce. It could also be that payments end as soon as your youngest child leaves the nest. The IRS will review your situation to determine whether the payments were indeed defined as alimony. The IRS makes exceptions for circumstances beyond your control, such as if alimony is modified downward by the court due to an unforeseen financial crisis.
