For couples in Texas who have been through a divorce or are about to get divorced, understanding how alimony interacts with taxes is important. The alimony tax rules have changed and are scheduled to change again, and this will have a major impact on taxes for both parties.
Alimony and taxes
The most important date for the tax treatment of alimony is Dec. 31, 2018. For all divorces that took place before that date, alimony is taxable income for the person who receives it, and the person who pays it may deduct it from their income taxes. Received alimony from those divorces should be entered in Schedule 1 of the standard 1040 form. Note that child support does not count as alimony. The payer of alimony reports what they paid on form 1040 as well.
For divorces that took place in 2019 or later, and for some divorces that were modified in that date range, the tax treatment is different. Alimony payments are no longer taxable income for the person who receives them, and the payments do not provide a tax deduction for the person who paid them. This means that they do not get reported on the tax forms anymore. However, the tax law that made these changes is set to expire in 2025. If these changes to alimony are not made permanent or extended by then, the rules will go back to what they were before 2019.
Understanding which set of rules applies to a divorce and what that means for reporting alimony is a key piece of information with major tax implications. Individuals who either pay or receive alimony need to know the applicable laws.
