Spousal Support IRS Tax Deduction Changes

 As of January 1, 2019, recipients of alimony will no longer be taxed by the IRS on spousal support received. However, paying spouses lose the eligibility to claim spousal support payments as a tax deduction, which was previously provided under Section 215 of the Internet Revenue Code.
This new law has no impact on those who signed a divorce agreement before January 1, 2019, thus posing questions concerning support changes. According to the new law, if a modification of an existing order entered on or before December 31, 2018, takes place between January 1, 2019, and December 31, 2025, the spousal support payments would remain tax-deductible to the payor and would be included in the income of the recipient unless the parties opted-in to the new law.
Payments received by a spouse must qualify as spousal support to meet the requirement for a tax deduction. According to IRS standards prior to 2019, qualifications include:
• The parties filing separate tax returns,
• Payments being made under a legal separation or divorce agreement,
• The agreement stating that payments are spousal support,
• The parties not living in the same home,
• The money paid remaining separate from the property settlement,
• The payments not being treated as child support,
• Support being terminated after the receiving spouse dies, and
• Payments only being made by cash, check or money order.
If you are a spousal support payor, we suggest you reach out to a tax professional to assist you with tax planning, especially if elimination of this tax deduction substantially impacts you. We offer unlimited complimentary tax planning advice to our clients. If you have questions about any tax issue, or how we could provide you with free tax planning advice, contact us.
For more information concerning Professional Tax Services, call 661-259-1967. Through the EZ2 Thrive program, Professional Tax Services provides unlimited complimentary advice on income and payroll taxes. For more information, visit www.scvprotaxservices.com.