Tax Season 2022: Are My Alimony Payments Tax-Deductible?

If you have recently gone through a divorce and are making alimony payments to your ex-spouse, you may wonder if your payments are tax-deductible. The answer is: it depends.

Changes to taxes brought by the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the deduction for alimony payments for divorces and legal separations obtained after December 31, 2018.

In addition to the elimination of the alimony deduction, recipients of alimony do not need to report alimony as income if the settlement was agreed to after December 31, 2018.

State laws vary on the matter, but the state of Michigan has declared that no state deduction can be claimed for alimony, nor is it required to be reported as income for divorces settled after December 31, 2018.

How Does the IRS Define Alimony Payments?

To qualify as an alimony payment, payments to an ex-spouse must meet certain criteria. Requirements include the following:

• A joint tax return is not filed with your former spouse
• Disbursements are made by cash, check, or money order
• Payments are made for an ex-spouse under a divorce or separation agreement
• Separated spouses cannot be part of the same household
• Liability for the payment doesn’t extend past the death of the ex-spouse
• Payment is not for child support or a property settlement

If all requirements are met, the IRS defines the payments as alimony for tax purposes.

What Types of Divorce Payments are Not Considered Alimony?

The following types of payments are not considered alimony by the IRS:

• Child support
• Noncash property settlements
• Payments to take care of the property of the alimony debtor
• Disbursements for the use of the alimony payer’s property
• Voluntary payments not required by a divorce or legal separation agreement

If a person is required to pay both alimony and child support but they do not make all payments for the year, then payments would be attributed to child support before alimony for tax purposes.

Do I Report Alimony on My Tax Return if My Divorce Was Settled Before December 31, 2018?

If your divorce was settled before December 31, 2018, any alimony payments made to an ex-spouse are fully deductible both in Michigan and on your federal tax return.

Ex-spouses who are receiving alimony payments must report their income on line 2a of Form 1040, Schedule 1. They must also list the date of separation or divorce and their ex-spouse’s Social Security number on line 2b of the same form.

Ex-spouses who pay alimony are required to enter the payment amount on line 18a of Form 1040, Schedule 1. The date of divorce or separation must be listed on line 18b, and their ex-spouse’s Social Security number should be entered on line 18c.

If you are required to report alimony income on your income tax return and don’t do so, you will be subject to penalties and interest for underreporting your taxable income.

When in Doubt, Contact a Divorce Attorney

If you need assistance with filing for divorce or legal separation in Michigan, contact The Gucciardo Law Firm, PLLC. Our attorneys are expertly trained and able to assist you in all areas of family law.