Fraud Blocker

Big changes are ahead for alimony and taxes

Many Springfield, Illinois, residents probably know that, recently, a major tax reform package passed through Congress and is now the law of the land. The changes will no doubt have far-reaching impacts, and one of these impacts is on how alimony gets accounted for one’s tax returns.

Before getting in to what is going to change, it is important to understand under what circumstances alimony is deductible from one’s taxes currently, as this system will last through December 31 of this year.

Basically, it’s important that a person’s divorce or legal separation order clearly spell out what payments are truly alimony and what payments are for something else, such as part of the division of property or child support. Of these three things, only alimony payments are deductible from one’s federal taxes.

Moreover, it is also important that the person paying the alimony is indeed living in a separate household as the person receiving the alimony, and it is also important that the two former spouses file their tax returns separately.

Under these circumstances, a person paying alimony can ordinarily deduct it form his or her income, while the person receiving it must account for the payments as income to them.

For all alimony orders initially entered after December 31, 2018, however, alimony will be treated more like child support is currently when it comes to taxes. Specifically, a person will not be allowed to deduct their alimony payments at all, and a person receiving those payments need not report them as income. This change will not affect those who are paying alimony now or who start to pay alimony this year. So long as those payers are otherwise eligible to do so, they may continue to deduct their payments.