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In 2019, Tax Rules Mean alimony Will No Longer Be Tax-Deductible

How will the new tax-law change to child support affect taxpayers in Washington?

Due to the Tax Cuts and Jobs Act, as of 2019, alimony payments will no longer be deductible for former spouses that pay it.

“For those people who have not completed their divorce in 2018, if there’s going to be spousal support—that’s no longer going to be tax deductible to the person who pays it, and it will no longer be income that the person who receives it has to report on their tax return,” says David Starks, a family law attorney in Seattle. “That matters, because, for 50 years or more, there has been an alimony deduction.”

For those who have already divorced, or entered into some other form of legal separation, their alimony payments will not change. However, if you are currently married, and you have a prenuptial agreement that states there will be alimony paid in the event of a divorce, for tax purposes, you will want to reach out to an experienced, reputable attorney.

“There are some agreements out there that may hold a nasty surprise for folks who go through a divorce later,” Starks says. “If they have a chance to look at what the prenuptial agreement provides, it would make sense to spend an hour with an attorney and figure it out.”

What is Alimony?

Alimony, also known as spousal maintenance or spousal support payments, is money that one spouse may be ordered to pay the other (paying spouse or earning spouse), for financial support, in the event of a divorce. It is typically guided by the needs of the person who is to receive it, as well as the ability of the other to pay it.

“You could need $10,000 per month, but if the other person doesn’t make sufficient money, you’re not getting it,” Starks says. “On the other hand, one person could make $20 million a year, and the court’s still going to look at what you really need. It’s not typically going to just order the other person to pay you $1 million of it.”

Recapture Rule

Starks notes that the IRS previously put to use a recapture rule, wherein they could audit and recapture the taxes that weren’t paid on alimony. “It would send a refund check to the person who’d received the maintenance for all the taxes they paid, and send a bill to the person who had written off the maintenance on their taxes, because they knew that bill was higher than the check they had to write,” he says.

The amount of time for which the alimony was to be paid was generally a tipping point for recapture. “Typically, if it didn’t last three years, the IRS was going to reject it as a maintenance payment,” Starks says.

What Changes Will Occur?

“There haven’t been changes in Washington regarding how we have our statutes written, because we don’t have mandatory guidelines for maintenance; it’s up to the judge to decide what maintenance ought to be if parties go to trial,” notes Starks.

However, due to tax changes, they will no longer be taxed on their alimony, and it’s likely that those receiving maintenance will receive smaller awards. 

“The money the payer pays is going to be taxed first, at that higher marginal rate,” says Starks. “But in general, the court is going to simply look at what that other person needs. And knowing that they don’t have to pay taxes on it means they’re not going to get quite as much on their gross amount as they would have if they’d received maintenance the old-fashioned way.”

He does believe, however, that since alimony will no longer be taxed, judges may be more lenient when considering ordering maintenance.

“Those cases where a judge might have rejected it—thinking they can’t see themselves ordering three years—it’s easy to imagine them now not needing to worry about the duration,” says Starks. 

For more information on child support payments, receiving alimony and separation agreements, see our overview of family law.

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