Are my alimony payments considered earned or taxable income?

Please note, for those who have alimony as the result of an agreement made after January 1, 2019— the tax rules have changed from previous years. 

According to the IRS, for those who divorced prior to 2019, alimony is deductible by the “payer spouse,” and the recipient spouse must include it as part of their income. Now, for those divorced after 2019, you can no longer deduct alimony specified in a divorce or separation agreement.  This is also true if the paperwork was executed before 2019 but modified after 2019 and the modification repeals the deduction. 

The IRS considers payments to a spouse or former spouse forms of alimony (for tax purposes this includes all payments made under divorce decree, maintenance decree, or separation agreement). To be clear, Child Support payments are not considered Alimony. Nor are property settlement payments. According to the IRS, Child Support payments are never deductible and cannot be considered income. Unfortunately, some ex-spouse “payers” may not pay the full amount when both Child Support and Alimony are due and the law states that the amount be considered Child Support first and whatever might be left can then be considered Alimony. 

Because this is at times a complicated and topic and since the law has recently changed where alimony is concerned – the IRS has published a document, Publication 504 which explains how the changes impact divorce and separation agreements after 2018 and how they will now be handled on your income tax return

In addition to changes in how they must be handled, there are also new caps on the Earned Income and Adjusted Gross Income each year. It’s important when your income changes as a result of Divorce or Separation agreement to review the tax rules to understand the Earned Income Tax Credit (EITC) and how it may or may not affect you. Recently the maximum amount of credit was revised to $6,431 (with three or more qualifying children). This is on a sliding scale down to $519 for no qualifying children – depending on your income. The adjusted gross income (AGI) for Married Filing Jointly was revised to a maximum of $54,884 for Married with three children down to $20,950 for no children. And for Single, Head of Household or Widowed, the maximum AGI with 3 or more children was $49,194 and for no children $15,270. Please note that these figures usually get revised annually. Visit, https://www.e-file.com/faq/eitc.php for more about the EITC.

Divorce and taxes, can be a complicated and sensitive topic.  If you would like to read more about how divorce may affect your taxes you can do so here: https://www.e-file.com/faq/divorce-taxes.php