Alimony is a key component of many divorces. One partner may be required to make payments to the other after the marriage is dissolved. Both parties need to understand the different tax treatments.
For agreements signed before 2019, the recipient must report alimony on their tax returns as income, and the payer can deduct payments on their taxes. However, a new law applicable to divorces finalized on or after Jan. 1, 2019, no longer treats alimony as income, meaning the payer can no longer deduct it. These tax implications must be factored in when negotiating alimony arrangements, and having experienced lawyers can help.
Is alimony taxable in Florida? Is alimony tax-deductible? The informed team at The Law Offices of Travis R. Walker, P.A., can help with your concerns about alimony vs. spousal support and the tax implications of alimony payments in Florida’s Treasure Coast.
The Role of Travis R. Walker Law in Alimony and Divorce Cases
The legal team at The Law Offices of Travis R. Walker, PA, are experts in family law. We handle many different types of divorce, alimony, and child support cases. We work closely with you to understand your goals and guide you through the complex legal process. We can also help if you fail to pay alimony.
One concern many divorcing couples have is whether alimony is taxable and what other tax implications it may have. We know all the Florida and federal tax laws, so you’re never left wondering what your obligations are or how the laws impact you and your family. We can also address many common myths about alimony.
Our client testimonials show how committed we are to helping you.
Mr. Walker was a God-send for enforcing my divorce judgment. Travis managed to accomplish in 2 months what another attorney failed to complete in 2 years. He and his team are insightful, professional, and proactive. I highly recommend Mr. Travis Walker, and wish I had found him prior to my divorce. -Jenny
Tax Treatment of Alimony in Florida
What is alimony? How is it treated when it comes to taxes? Alimony is spousal financial support that one party in a divorce provides to the other party. Often, alimony will only be paid for a temporary period. For instance, bridge-the-gap alimony is paid during the transitional period of the divorce. However, some arrangements are long-term.
Previously, alimony was considered taxable, and recipients had to report payments as income on their tax return. The taxpayer who receives the payments is required to include it in their income. In addition, those paying alimony could deduct the payments on their tax returns. However, a recent law significantly changed the rules.
Alimony and the Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act of 2017, or TCJA, made sweeping changes to tax law, including changes to tax credits and what could be claimed as expenses and deductions. In particular, TCJA updated alimony taxation laws for divorces on or after Jan. 1, 2019.
The law provides that recipients no longer need to include alimony as taxable income. Any payments for alimony or other maintenance payments related to a divorce agreement finalized on Jan. 1, 2019, or after are not considered taxable income.
Conversely, alimony payers can no longer deduct alimony payments on their tax returns. This change can be major for a payer who counted on deductions for those payments to reduce their taxes.
The TCJA only applies to divorces finalized on or after Jan. 1, 2019. If the divorce agreement was executed before then, the previous tax treatment continues, meaning recipients must still report it as income, and the payers could claim a deduction.
However, the new law also applies if an agreement executed on or before December 31, 2018, is modified after that date.
In addition, some divorce-related payments aren’t treated as alimony. The following types of support have different tax rules that apply:
- Property upkeep payments
- Child support
- Payments for use of the payer’s property
- Payments made voluntarily, not under the divorce agreement
- Noncash property settlements
For instance, child support is never deductible and isn’t considered income.
Get all the facts you need to understand your tax obligations. Talk to a knowledgeable divorce lawyer at Travis R. Walker Law today.
Tax Planning for Alimony Recipients
Only alimony payments received under agreements signed before Jan. 1, 2019, are taxable. You don’t have to report payments received under an agreement signed after that date on your income tax return, nor do you have to pay taxes on them.
However, it’s important to understand how to minimize your tax liability for any taxable payments that qualify under the TCJA. Typically, the spouse with the higher income makes payments to the spouse with the lower income. Follow these tips if you receive taxable alimony:
- Pay attention to how the tax payments may impact your tax bracket.
- Plan in advance to make the required tax payments by saving some of each taxable payment you receive.
- Do your research or talk to a tax expert about any credits or deductions you may qualify for to offset your taxes.
When you have questions about taxable alimony, such as how alimony is calculated, work with the team at Travis R. Walker Law, serving Florida’s Treasure Coast.
Tax Considerations for Alimony Payers
You can only claim the alimony deduction for payments made under agreements finalized before 2019 if those are cash payments and not in-kind payments. For example, alimony paid in the form of items or services is not deductible.
As an alimony payer, you may have been counting on a deduction that is no longer allowed because of the TCJA. It’s important to properly balance your taxable income with any deductions or credits you’re eligible for so you can handle your tax liability each year. Just don’t factor in alimony deductions after 2019.
Make sure you are also factoring in the alimony payments you must make when planning your finances throughout the year. Child support payments are not deductible for the payer or taxable for the recipient.
Reporting Alimony on Tax Returns
Reporting alimony on your tax return is fairly straightforward when you know what to do. Here are the key steps for reporting alimony on your federal return, Form 1040, Schedule 1.
To report alimony paid under a divorce agreement in place before Jan. 1, 2019:
- Input the amount of alimony paid on line 18a.
- Enter the Social Security number of the alimony recipient on line 18b.
- Enter the date of the divorce agreement on line 18c.
To report alimony received under a divorce agreement in place before Jan. 1, 2019:
- Input the amount of alimony received on line 2a.
- Enter the date of the agreement on line 2b.
In July 2023, a new alimony reform law became effective in Florida. Key changes to know are:
- Permanent alimony was eliminated.
- Florida courts can now consider the adultery of either spouse when awarding alimony.
- The factors for determining alimony were updated, including whether the seeking party needs support.
- Durational alimony terms were updated.
These changes went into effect for all initial petitions for dissolution of marriage filed or pending as of July 1, 2023.