When you are going through a divorce, there can be so many moving parts that it can all feel overwhelming. The issues addressed in divorce proceedings can also have significant impacts on your life in ways you may not have first considered. Even the seemingly smallest details will still need to be accounted for and questions will continue to arise that you may not have thought about before. For instance, are you receiving alimony payments from your former spouse? Do you know the tax consequences of such payments? Here, we will discuss in more detail whether you need to claim these alimony payments as taxable income.
Are Alimony Payments I Receive Taxable Income?
In the 2019 tax year, the rules regarding reporting alimony payments on personal tax returns changed. Previously, alimony payments were tax-deductible, however, the Tax Cuts and Jobs Act (TCJA) changed this. Alimony is reportable income whereas there used to be an alimony deduction. Pursuant to the TCJA, the elimination of the alimony deduction will stand from 2019 through 2025 for the majority of divorce decrees entered during that time frame, unless Congress makes changes to this piece of legislation. Congress may attempt to extend the provision eliminating the alimony deduction or revert things to a time when there was an allowable deduction for alimony. As it stands now, however, alimony payments you receive are considered taxable income and must be reported as such on your tax return.
It can be important to note, however, that alimony received can still be deductible if your divorce decree was entered into in 2018 or prior. Furthermore, if your divorce decree was entered into in 2018 or prior, but was modified any time after December of 2018, the repeal of the alimony deduction will apply to the modification. For divorce decrees entered into or modified after 2018, receipt of alimony is a taxable event. The payer, however, is permitted to take a deduction for the payment of alimony should certain requirements be met.
To report alimony as income on your tax return, enter the full amount received on line 2a of Form 1040. It can be important to note that alimony can include those payments you received when you were legally separate, but prior to the final divorce decree being entered. If you failed to properly account for alimony payments received as taxable income, you may still have the ability to go back and amend your tax return for 2018 or 2019. Taxpayers are usually permitted to amend a return up to three years from the date of filing the original return. Should you have paid taxes on a return, however, and done so on a date different from when you filed your taxes, you only have two dates from the date of payment or three years from the date of filing, whichever is the later date.
Florida Family Law Attorneys
At Orlando Family Team, our dedicated team can help not only walk you through the divorce process but also counsel you on some of the effects of divorce you may feel well after proceedings have come to an end. Contact us today.