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What Counts as Alimony for Taxes?

After you're divorced, you might find yourself wondering what counts as alimony for tax purposes. Even if you're still in the process of divorce, it can be very important to understand how taxes and change or influence the alimony process. Also known as spousal support or spousal maintenance, alimony is meant to help a spouse who earns less continue their quality of life after divorce. Whether or not a person’s alimony is tax-deductible depends on when their divorce was finalized.  

When Is Alimony Tax Deductible? 

In recent years, the Internal Revenue Service has changed the way that it taxes alimony. In 2017, a new set of laws under the Tax Cuts and Jobs Act changed how alimony is taxed. If a divorce was finalized before January 1, 2019, a person paying alimony can report their payments as a tax deduction. Those receiving payments from a divorce finalized before January 1, 2019 must report it as income.  

If a couple divorced after January 1, 2019, the spouse receiving the alimony payments does not have to report it as income. Additionally, the person paying the alimony can no longer receive a tax deduction for it. 

If your divorce was finalized in time to have tax-deductible alimony, it’s important to discuss with a tax professional if you should take advantage of the credits. In some instances, it might be more beneficial for someone if they choose to make their alimony payments non-deductible. 

Why Do Taxes Matter During a Divorce Agreement? 

Divorce is already a difficult process for many. When alimony was deductible, the spouse who would pay it might be less resistant knowing they would get some of that money back. With the new law blocking tac deductions to payors, some might feel as though the other party is receiving more benefits now that they are no longer required to report their payments as income. In short, tax issues have the potential to make a divorce agreement contentious.  

At Miller Law Group, P.C., our experienced Massachusetts divorce attorneys know how hard this process can be. Our mission is to help our clients by making sure they are being treated right. Ultimately, divorce should be fair and should not be about winning or losing. Our team advocates for clients by making sure their interests are protected throughout their divorce. 

We’re ready to help protect your interests during your divorce. Call our Massachusetts divorce lawyers today at (508) 502-7002 for a free initial consultation.