Reporting Alimony In 2019 Under The TCJA

To Be Alimony, A Payment Must Meet Certain Requirements

According to the National Center for Health Statistics, 2,236,496* marriages occurred in 2017. During the same year, there were 787,251* divorces. When the data for divorces in 2018 is compiled, you might notice a slight uptick near the end of the year. The reason for the increase is likely due to changes set to take effect in 2019 in the way alimony is treated under the new Tax Cuts and Job Act, according to a CBS News report.

*Based on provisional data from 45 reporting states and the District of Columbia.

Alimony Under The Tax Cuts and Jobs Act

Taxpayers should be aware of tax law changes related to alimony and separation payments. These payments are made after a divorce or separation. The Tax Cuts and Jobs Act changed the rules around them, which will affect certain taxpayers when they file their 2019 tax returns next year.

Here are some facts that will help people understand these changes and who they will impact:

The law relates to payments under a divorce or separation agreement. This includes:
- Divorce decrees
- Separate maintenance decrees
- Written separation agreements

In general, the taxpayer who makes payments to a spouse or former spouse can deduct it on their tax return. The taxpayer who receives the payments is required to include it in their income.
Beginning January 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after December 31, 2018.
If an agreement was executed on or before December 31, 2018 and then modified after that date, the new law also applies. The new law applies if the modification does these two things:
- It changes the terms of the alimony or separate maintenance payments.
- It specifically says that alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.
Agreements executed on or before December 31, 2018 follow the previous rules. If an agreement was modified after that date, the agreement still follows the previous law as long as the modifications do not do what’s described above.

What Is Considered Alimony?

Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that aren’t made under a divorce or separation instrument.

Alimony is deductible by the payer, and the recipient must include it in income. Although this discussion generally is written for the payer of the alimony, the recipient also can use the information to determine whether an amount received is alimony.

Alimony Requirements

A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses don’t file a joint return with each other and all the following requirements are met.

The payment is in cash.
The instrument does not designate the payment as not alimony.
The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
The payment is not treated as child support. Each of these requirements is discussed next.

Payments That Are Not Alimony

Not all payments under a divorce or separation instrument are alimony. Alimony does not include:

Child support
Noncash property settlements
Payments that are your spouse’s part of community income
Payments to keep up the payer’s property
Use of the payer’s property