Hello to my fellow Americans. I have the honor of presenting Storen Financial’s blog for the month of July. The month that we celebrate our independence from King George. And in keeping with the Spirit of ’76, we are going to talk about independence from a spouse and the payment of alimony or separate maintenance. For this blog, when I use the term ‘alimony’, it also includes separate maintenance unless specifically excluded.
To put a twist on Patrick Henry’s famous words. “Give me liberty from this marriage, and a tax deduction to boot, for the alimony I have to pay my ex”, can no longer be heard in divorce courts throughout the land.
With the Tax Cuts and Jobs Act of 2017 couples whose divorce is final after 12/31/18 and alimony is a condition of the settlement, the alimony payments will no longer be a tax deduction for the payor and taxable income for the payee. Couples who divorced before 1/1/19 can go back to court to have the conditions of the divorce modified. The modification needs to expressly state the repeal of the deduction for alimony payments. (IRS Tax Topic #452 – Alimony and Separate Maintenance)
To have payments to an ex-spouse qualify as alimony, all the following must be present:
- The spouses do not file a joint tax return;
- The payment is in cash or a cash equivalent (checks or money orders);
- The payment is to or for a spouse or former spouse made under a divorce or separation instrument;
- The spouses aren’t members of the same household when the payment is made;
- There is no liability to make the payment after the death of the recipient spouse; and
- The payment isn’t treated as child support or a property settlement.
In my years of preparing taxes and the very many years of assisting Pat Storen, I have known of less than a dozen clients that had alimony as part of their divorce decree. Indiana was not the hotbed of alimony like California and other States were.
If you paid or received money to or from an ex-spouse and it seems to meet the above listed conditions, and you have questions, please contact me for a consultation.
Blog by Doug Johnson – Senior Tax Professional
Learn more about Doug and the rest of the Storen Financial team here.