Is Alimony Tax Deductible?

Posted by Josh Valentine | Oct 21, 2019

Alimony can represent a significant post-divorce expense, possibly for decades into the future. In the past, alimony payments were deductible for the supporting spouse and helped offset the expense of providing monthly payments to the dependent spouse. However, after a change to the tax law, alimony payments will no longer be tax-deductible for divorce agreements since 2019.  

Tax Treatment of Alimony in 2019

Before 2019, alimony payments were generally tax-deductible for the payer spouse, where certain requirements were met. However, tax law changes that were part of the Tax Cuts and Jobs Act (TCJA) eliminated the deduction for alimony agreements made or modified after 2018. Additionally, alimony payments do not have to be reported as income for the dependent spouse under the new rules. 

According to the Internal Revenue Service (IRS), you cannot deduct alimony or separate maintenance payments made under a divorce or separation agreement:

  1. Executed after 2018, or 
  2. Executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. 

Alimony and separate maintenance payments received under such an agreement are not included in your gross income.

Alimony Deduction Before 2019

Individuals who entered into a divorce or separation agreement before January 1, 2019, are still covered by the prior tax treatment. However, if the divorce agreement is modified after 2018 and the modification expressly states the deduction no longer applies, the new tax laws will generally apply. 

For alimony agreements pre-2019, the alimony payments still generally have to meet a number of requirements, including: 

  • The spouses do not file a joint return with each other;
  • The payment is in cash (including checks or money orders);
  • The payment is to or for a spouse or a former spouse made under a divorce or separation instrument;
  • The divorce or separation instrument does not designate the payment as not alimony;
  • The spouses are not members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);
  • There is no liability to make the payment (in cash or property) after the death of the recipient spouse; and
  • The payment is not treated as child support or a property settlement.

Alimony in North Carolina

Under North Carolina divorce law, a spouse who earns substantially higher wages than their partner may be ordered by the court to pay alimony to a dependent spouse. The purpose of these payments is to assist a spouse in maintaining the standard of living they were accustomed to during the marriage until they become completely self-sufficient.

There are a number of factors that the court considers in determining whether or not alimony will be awarded, the duration, and the amount of alimony. Some factors include: 

  • Marital misconduct of either of the spouses;
  • Relative earnings and earning capacities of the spouses;
  • Duration of the marriage;
  • Contribution by one spouse to the education, training, or increased earning power of the other spouse;
  • Standard of living of the spouses established during the marriage; and
  • Federal, state, and local tax ramifications of the alimony award. 

Federal tax ramifications of an alimony award may be a factor in determining alimony in North Carolina and the new tax laws could have a significant impact on the cost of spousal support. Talk to your divorce attorney if you have any questions about how the tax law may affect your divorce agreement.  

North Carolina Family Law Firm in Shelby

If you have any questions about alimony, post-separation support, or other concerns about a divorce in North Carolina, the skilled attorneys at Caulder & Valentine are here to help. Contact us today for a consultation.

About the Author

Josh Valentine

You could say Josh has a God-given ability for sustaining long-term relationships. He and his wife first met in elementary school and went to Gardner Webb University (GWU) together, where they tied for number 1 in their class. Then, they both started law school on the same day of their graduation and got married during their first semester. He has also known his law partner Blake Caulder since Kindergarten. Theirs is the perfect partnership. “He’s the brake; I am the accelerator,” Josh says. Both Josh and his wife attended an innovative program at Charlotte Law School that allowed them to complete law school in two years instead of the typical three. His wife graduated and passed the North Carolina bar at age 20, becoming one of the youngest attorneys in the state. He readily admits she’s smarter than him. Of course, Josh went on to pass the North Carolina State Bar himself and later the South Carolina State Bar. While in school, he was Associate Editor of the Law Review and received accolades like Phi Delta Phi International Legal Honor Society membership, Order of the Crown, Pro Bono Honors, CALI Awards (highest grade). In his career as a lawyer, he has been admitted to the United States Federal Court for the Western District of North Carolina, is a member of the American Association of Premier DUI Attorneys, and completed training for DWI Detection & Standardized Field Sobriety Testing. Josh has also been named to the Top 40 Under 40 for Criminal Defense by The National Trial Lawyers, the Business North Carolina 2019 Legal Elite for Criminal Defense, and the 10 Best Attorneys for Client Satisfaction by the American Institute of Criminal Law Attorneys three years in a row (2016, 2017, and 2018). Community involvement has been important to Josh all his life. In high school, he participated in building a Holocaust museum that has become internationally regarded. He and his wife are actively engaged in animal rescue, which currently means seven cats and two kittens. He served in prison ministry and assisted with fundraiser banquets there, and he provides pro bono and reduced fee legal services to those in need. As if all of that weren’t enough, Josh also mentors high risk youth and helps with his church’s youth group. He participates in other community volunteer projects involving construction, remodeling, drywall, painting, and landscaping. He’s an active student of the Bible and has traveled to Israel, Brazil, and Europe for mission work. No one can say Josh isn’t a well-rounded individual. In his spare time, he likes to play softball, basketball, and tennis, and he can play the piano and trombone. Sometimes on weekends, believe it or not, he enjoys pouring and finishing concrete with friends who own a concrete and grading business. In his law practice, Josh has made it a point to develop positive relationships with officers, clerks, and district attorneys, which has proven invaluable in delivering positive results for his clients. It’s important to him to both listen to his clients and fight for them. Law enforcement officers have important responsibilities to keep our communities safe and uphold the law, but one of the responsibilities of attorneys is to make sure officers do their job correctly. Josh considers it his job to hold them accountable for their actions. Josh is a person of deep faith. He knows that the established order of our universe and strength of America’s Judeo-Christian influenced court system is built on God’s word. His passion to serve each client with innovation, excellence and integrity is a byproduct of his faith. When asked why he became a lawyer, Josh says, “All through my life, I have personally witnessed family members and very close friends endure divorce, child custody battles, bankruptcy, civil lawsuits, and even fraudulent criminal accusations. I both saw and experienced the stress such events can place on an individual, and I realized that everyone, at some point in their life, needs hope, comfort, and encouragement. In each one of those situations, the person who was best situated to provide that vital support was their lawyer. So that’s why I became an attorney. I understand what you are going through, and I’m here to help you. Our office is focused on meeting your needs and guiding you through what may be the most difficult time of your life.” Education: Charlotte School of Law J.D., Magna Cum Laude Class Rank – 21 of 328 Associate Editor of Charlotte School of Law Law Review Certification and Concentration in Employment Law Phi Delta Phi International Legal Honor Society Order of the Crown Pro Bono Honors CALI Awards (Highest Grade)—Lawyering Process I and Contracts I Full Scholarship Gardner-Webb University B.S. in Accounting, Summa Cum Laude Distinguished Senior Student Award – Highest GPA Alpha Sigma Lambda National Honorary Society Bar Admissions: North Carolina State Bar