Taxation of separate maintenance payments and alimony has been significantly altered in recent years, most significantly after the enactment of the Tax Cuts and Jobs Act (TCJA) in 2017. Deductibility of alimony payments is based on the nature of the divorce or separation agreement and what the precise language of the agreement is. The following is a detailed explanation of the alimony and tax deduction rules for 2025.
Tax treatment before and after 2019
Pre 2019 agreements
For divorce or separation agreements signed on or before Dec. 31, 2018, alimony payments continue to be tax deductible for the payer and tax includable in the income of the recipient. That is:
- Payer: You may qualify for alimony payments as a deduction from your taxable income, lowering your total tax bill.
- Recipient: You will have to include alimony payments as taxable income on your federal tax return.
These reductions are “above-the-line,” and they reduce adjusted gross income (AGI), which can impact eligibility for other tax benefits.
Post-2019 agreements
For agreements entered into after January 1, 2019, the TCJA eliminated both the deduction by the payer and the reporting by recipients of the payments as taxable income. Under this rule:
- Payer: Alimony payments are not deductible.
- Recipient: Alimony payments received are not taxable.
This modification is to new contracts and to any contract entered into prior to 2019, altered after January 1, 2019, if the alteration specifically provides that the new taxation system shall be effective.
Requirements for deductibility (Pre-2019 Agreements)
To make payments deductible alimony under pre-2019 legislation, there are certain requirements to be fulfilled:
- Cash payments: The payment should be in cash, i.e., money orders or checks, and not property transfers.
- Legal document: Payments can only be made under a divorce or separation agreement like a court order or written document.
- Not living together: The payee and payer are not required to live in the same household at the time of payment if the couple is legally separated.
- Stops on death: Payment obligations must cease on the death of the receiving spouse.
- No deduction for child support: Child support payments cannot be deducted.
Failure to qualify prohibits alimony payments from being deducted.
Reporting alimony on tax returns
Payers
When you can deduct alimony (in pre-2019 marriages), you report it on Form 1040, Schedule 1, “Additional Income and Adjustments to Income.” You must provide:
- The Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN) of the recipient.
- The amount received during the year.
Failure to do so may lead to disallowed deductions and penalties.
For recipients
Pre-2019 agreement recipients of taxpaying alimony are required to report it as income in their federal income tax return. It may be added to their overall tax expense based on their marginal tax rate.
Voluntary versus legally enforceable payments
Maintenance payments are never taxable or deductible:
- Legally enforceable payments: Payments made under order of a court or in line with a legally binding agreement are deductible (prior to 2019 rules) if IRS standards are satisfied.
- Voluntary payments: Voluntary payments not paid under any statutory requirement are neither deductible to the payer nor reportable income to the receiver.
Effect of tax reform on divorce settlements
TCJA’s elimination of alimony deductions has specifically changed divorce negotiations. Historically, the item for deductibility was always used as a bargaining chip, and in order to balance tax, the payer could end up saving money. With TCJA, this incentive no longer exists, and alimony agreements may be more expensive to the payer and easier for receivers to report on their tax.
Whether or not payments of separate maintenance or alimony are deductible as a tax depends, to a great extent, on when the divorce or separation agreement was entered into:
- Those agreements completed before January 1, 2019, remain deductible to payers and taxable to recipients.
- Those agreements signed after this date fall under new provisions where there is no deduction or taxation.
Understanding the differences is essential for those going through divorce settlements in 2025. Those with decrees prior to 2019 must ensure that they follow IRS guidelines to be in a position to claim deductions, while others ought to harmonize financial assumptions under the post-TCJA rules. A tax expert can decode the individual case and allow adequate reporting.
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