Is alimony taxable?
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UPDATED: Jul 15, 2021
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Alimony or spousal support payments are tax deductible by the payer and taxable income to the supported spouse on separation or divorce agreements signed before 2019. Beginning in 2019, under the 2017 Tax Cuts and Jobs Act, there are new rules: there is no tax deduction for the payer for alimony payments and recipients of the payments will no longer report such payments to the IRS as taxable income.
Child support payments, on the other hand, are typically not deductible from the income of the payer and are not included as taxable income to the supported spouse.
According to the Federal Internal Revenue Code, ” … any payment which the terms of the divorce or separation instrument fix (in terms of an amount of money or a part of the payment) as a sum which is payable for the support of children of the payer spouse” is not considered alimony or a separate maintenance payment. Thus, such payments are a tax neutral event (they are non-taxable to the person receiving them and non-deductible to the person making them).
Federal Income Tax Regulations state:
“A payment is fixed as payable for the support of a child of the payer spouse if the divorce or separation instrument specifically designates some sum or portion (which sum or portion may fluctuate) as payable for the support of a child of the payer spouse. A payment will be treated as fixed … if the payment is reduced (a) on the happening of a contingency relating to a child of the payer, or (b) at a time which can clearly be associated with such contingency. … For this purpose, a contingency relates to a child of the payer if it depends on any event relating to that child, regardless of whether such event is certain or likely to occur. Events that relate to a child of the payer include the following: the child’s attaining a specified age or income level, dying, marrying, leaving school, leaving the spouse’s household, or gaining employment.”
Thus, under Federal income tax law, regardless of the label that is used, most child support payments are a tax neutral event, while most support payments under divorce or separation agreements signed before 2019 provided to the other (former) spouse are deductible to the payer and included in the taxable income of the supported spouse. Starting 2019, the spouse paying the alimony cannot deduct the payments and the ex-spouse who receives the payments no longer has to pay taxes on them.