The rules for how alimony is taxed in the United States 🇺🇸 changed in a big way because of the Tax Cuts and Jobs Act (TCJA), which became law in 2017. These changes started to affect people who got divorced after December 31, 2018. If you are going through a divorce, paying or receiving alimony, or planning your finances after a separation, it’s important to know how these rules work in 2025 and what you need to do next.
Let’s break down what changed, who is affected, what steps you need to take, and what these changes mean for people dealing with divorce and alimony today.
Summary of What Changed
Before the TCJA, the person who paid alimony could deduct those payments from their taxable income, which often lowered their tax bill. The person who received alimony had to report it as income and pay taxes on it. This system helped couples save money on taxes because the person paying alimony was usually in a higher tax bracket, while the person receiving it was often in a lower one.
After the TCJA, for divorce or separation agreements made after December 31, 2018, the rules flipped:
- Alimony payments are no longer tax-deductible for the person paying them.
- The person receiving alimony does not have to report it as income or pay taxes on it.
This change is permanent, unlike some other parts of the TCJA that are set to expire at the end of 2025. The new rules apply to all divorce or separation agreements made after December 31, 2018, and to older agreements that are changed after that date if the new rules are included in the updated agreement.
Who Is Affected by the New Alimony Rules?
The new rules affect:
- Anyone who finalized their divorce or legal separation after December 31, 2018.
- People with older divorce agreements that were changed after December 31, 2018, if the new agreement says the TCJA rules apply.
- People who are currently negotiating a divorce or legal separation.
If your divorce or separation agreement was signed on or before December 31, 2018, and has not been changed to include the new rules, the old tax rules still apply to you. That means you can still deduct alimony payments, and the person receiving alimony must report it as income.
Effective Dates and Key Deadlines
- December 31, 2018: This is the main cutoff date. If your divorce or separation agreement was signed before this date, the old rules apply unless you change your agreement to follow the new rules.
- After December 31, 2018: All new divorce or separation agreements follow the new TCJA rules. If you change an old agreement after this date and the change says the new rules apply, you must follow the new rules.
Required Actions for People Dealing with Alimony and Divorce
If you are paying or receiving alimony, or if you are in the process of getting divorced, here’s what you need to do:
1. Find Out When Your Divorce Agreement Was Signed
– Look at the date on your divorce or separation agreement.
– If it was signed before December 31, 2018, check if it has been changed since then.
– If it was signed after December 31, 2018, or changed to include the new rules, the TCJA rules apply.
2. Review Your Agreement for Modifications
– If you have an older agreement, see if it was changed after December 31, 2018.
– If the change says the new rules apply, you must follow them.
– If not, you may still use the old rules.
3. Talk to a Tax Professional or Lawyer
– The rules can be confusing, especially if your agreement has been changed.
– A tax professional or divorce lawyer can help you understand which rules apply to you and how to report alimony on your taxes.
4. Check State Tax Laws
– Some states have their own rules about alimony and taxes.
– Even if the federal government does not tax alimony, your state might.
– Visit your state’s tax website or ask a tax professional for help.
5. Plan Your Finances Carefully
– If you are paying alimony, remember that you cannot deduct these payments from your income anymore.
– If you are receiving alimony, you do not have to pay federal taxes on it, but check your state’s rules.
Implications for Pending Applications and Ongoing Cases
If you are in the middle of a divorce or thinking about changing your agreement, the timing is important:
- Divorces not yet finalized: If your divorce is not final and you expect to pay or receive alimony, the new rules will apply unless you have an older agreement.
- Modifying an old agreement: If you change your old agreement and add language that says the TCJA rules apply, you will lose the deduction if you are the payer, and the recipient will not have to pay taxes on the alimony.
- No changes to old agreements: If you do not change your old agreement, the old rules continue to apply.
How the Tax Cuts and Jobs Act Changed Alimony
The Tax Cuts and Jobs Act made a big change to how alimony is taxed. Here’s what you need to know:
- For agreements signed after December 31, 2018:
- The person paying alimony cannot deduct the payments from their taxes.
- The person receiving alimony does not have to report it as income.
- This is different from the old rules, where the payer got a tax break and the recipient paid taxes.
- For agreements signed on or before December 31, 2018:
- The payer can still deduct alimony payments.
- The recipient must report alimony as income and pay taxes on it.
- If the agreement is changed after December 31, 2018, and the new rules are included, the new rules apply.
Why Did the Law Change?
The government wanted to make the tax system simpler and to stop people from arguing about who should get the tax break. The new rules also make alimony payments more like child support, which is not tax-deductible for the payer and not taxable for the recipient.
Permanent Change
The TCJA made this change permanent. While some other parts of the law will end after 2025, the rules about alimony will not change unless Congress passes a new law.
State-Level Differences
Even though the federal government changed the rules, some states still allow the payer to deduct alimony or require the recipient to pay taxes on it. It’s important to check your state’s rules. For example, California and New York have their own tax rules about alimony.
Financial Impact on Divorcing Couples
The new rules have changed how people negotiate divorce settlements:
- Payers face higher costs: Since they cannot deduct alimony, they pay taxes on all their income before making alimony payments. This can make alimony more expensive for the payer.
- Recipients keep more money: The person receiving alimony does not have to pay federal taxes on it, so they keep more of the money.
- Negotiations are harder: Couples may argue more about how much alimony should be paid because the payer does not get a tax break.
- Alternative arrangements: Some couples now choose lump-sum payments or property transfers instead of monthly alimony to avoid tax problems.
Examples to Help You Understand
Let’s look at two examples:
Example 1: Divorce Finalized in 2017
– John and Mary divorced in 2017. John pays Mary $1,000 a month in alimony.
– John can deduct $12,000 a year from his taxes.
– Mary must report $12,000 as income and pay taxes on it.
– If they do not change their agreement, these rules stay the same.
Example 2: Divorce Finalized in 2020
– Sarah and Tom divorced in 2020. Tom pays Sarah $1,000 a month in alimony.
– Tom cannot deduct the $12,000 a year from his taxes.
– Sarah does not have to report the $12,000 as income.
– These rules will not change unless the law changes again.
What If You Want to Change Your Old Agreement?
If you want to change your old divorce agreement, you need to be careful. If you add language that says the new TCJA rules apply, you will lose the deduction if you are the payer, and the recipient will not have to pay taxes on the alimony. If you do not add this language, the old rules still apply.
What Counts as Alimony?
Not all payments to a former spouse count as alimony. For a payment to be considered alimony:
- The payment must be made under a divorce or separation agreement.
- The payment must be in cash (not property).
- The payment cannot be child support or part of a property settlement.
- The payment must end if the recipient dies.
If these rules are not met, the payment is not considered alimony for tax purposes.
What Does Not Count as Alimony?
- Child support payments
- Property settlements (like giving your ex-spouse a car or house)
- Payments not required by a divorce or separation agreement
These payments are not tax-deductible and are not taxable income.
Frequently Asked Questions
Q: Are alimony payments deductible in 2025?
A: No, if your divorce was finalized after December 31, 2018, you cannot deduct alimony payments on your federal taxes.
Q: Do I have to report alimony as income in 2025?
A: No, if you receive alimony from a divorce finalized after December 31, 2018, you do not have to report it as income on your federal taxes.
Q: What if my divorce was finalized before 2019?
A: If your agreement was signed before December 31, 2018, and has not been changed to include the new rules, you can still deduct alimony payments, and the recipient must report them as income.
Q: Are there any upcoming changes to alimony taxation?
A: As of July 25, 2025, there are no announced changes. The TCJA rules are permanent unless Congress passes a new law.
Q: Do states have different rules?
A: Yes, some states have their own rules about alimony and taxes. Check your state’s tax website or talk to a tax professional.
Where to Find Official Information
For the most accurate and up-to-date information, visit the IRS Alimony page for details on how alimony is taxed and what counts as alimony. This page explains the rules, gives examples, and answers common questions.
Practical Steps for People Dealing with Alimony
- Check your divorce agreement date and any changes.
- Talk to a tax professional or lawyer to understand your tax obligations.
- Review your state’s tax rules about alimony.
- Plan your finances, knowing that alimony is not deductible for payers and not taxable for recipients under the new rules.
- If you are negotiating a divorce, consider other options like lump-sum payments or property transfers.
Final Thoughts
The Tax Cuts and Jobs Act changed the way alimony is taxed in the United States 🇺🇸. If your divorce was finalized after December 31, 2018, or if you changed your agreement to include the new rules, you cannot deduct alimony payments, and the person receiving alimony does not have to pay taxes on it. These rules are permanent and affect how people negotiate and plan for divorce.
As reported by VisaVerge.com, these changes have made divorce negotiations more complicated and have increased the financial burden on people who pay alimony. It is important to understand which rules apply to you and to get professional advice if you are unsure.
For more information, always check the official IRS Alimony page or talk to a trusted tax professional. This will help you avoid mistakes and make the best decisions for your situation.
Learn Today
Alimony → Payments from one spouse to another under a divorce or separation agreement for support.
Tax Cuts and Jobs Act → A 2017 federal law that changed many tax rules, including alimony taxation from 2019.
Tax Deductible → An expense that can be subtracted from taxable income, reducing overall tax owed.
Divorce Agreement → A legal document outlining terms such as alimony and property distribution after divorce.
Federal Taxes → Taxes imposed by the U.S. government on income, including specific income types like alimony.
This Article in a Nutshell
The TCJA permanently changed alimony taxation, ending deductions for payers and income reporting for recipients. This affects divorces finalized after 2018 and complicates divorce financial planning.
— By VisaVerge.com
