Taxable alimony refers to payments made from one spouse to another during or after a divorce that are considered taxable income for the recipient and tax-deductible for the payer. However, it's important to note that the treatment of alimony for tax purposes has changed significantly under the Tax Cuts and Jobs Act (TCJA) enacted in December 2017.
Prior to 2019:
- Alimony payments were deductible for the payer and considered taxable income for the recipient.
For divorce agreements executed after December 31, 2018:
- Alimony payments are no longer deductible by the payer, nor are they considered taxable income for the recipient. This means that neither spouse will report the payments on their tax returns.
For divorce agreements executed before January 1, 2019:
- The old rules still apply: alimony can be deducted by the payer and is taxable to the recipient.
It’s important for both parties involved in a divorce to understand how the tax treatment of alimony will affect their financial situation, and they might consider consulting with a tax professional for personalized advice based on their specific circumstances.
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