Tax Law and News Alimony and Tax Reform: What You and Your Clients Need to Know Now Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Kimberly Doherty, EA Modified Mar 5, 2019 1 min read For couples facing divorce in 2018, the Tax Cuts and Jobs Act (TCJA) brought about changes that must be carefully considered when deciding what would be more beneficial financially: finalizing the divorce before Dec. 31, 2018, or postponing the divorce until after Jan. 1, 2019. For post-2018 divorce agreements, tax laws change drastically. The law eliminates deductions for alimony to the payer, which is also referred to as spousal maintenance payments in Texas, and provides tax-free payments to the recipient. It is important to note that pre-2019 divorce agreements are not affected by the provisions of TCJA; they will remain deductible for the payer and taxable for the receiver. Under current federal tax law, alimony payers receive the benefit of above-the-line deductions for payments made during the year to their former spouses, resulting in tax savings on the payer’s personal income tax returns. In most cases, the alimony recipient claims the payments as taxable income on their personal income tax return. For nonconforming states, the treatment of alimony payments would remain as it had been prior to tax reform. For partially conforming states, please research changes to alimony treatment prior to advising your client. As your client’s trusted adviser, you can help them navigate the tax side of their divorce agreements before the end of 2018, since they will no longer have the same options in 2019 when the TCJA takes effect. Editors note: This article was updated on Dec. 10, 2018, to clarify information about federal tax law vs. state conformity. Previous Post IRS Announces a New Tax Transcript and Transcript Delivery Changes Next Post Tax Reform and Qualified Opportunity Zones Written by Kimberly Doherty, EA Kimberly Doherty, EA, is a tax content analyst and product owner for Intuit® ProConnect™ Tax Online and Lacerte® in Plano, TX. She is responsible for eight states. Prior to joining Intuit in September 2014, Kimberly was co-founder of a private tax and bookkeeping firm, where she focused on tax preparation and IRS representation for clients. More from Kimberly Doherty, EA 9 responses to “Alimony and Tax Reform: What You and Your Clients Need to Know Now” If you re-negotiate your spousal support after 12/31/18 will you be able to get the benefit of the new rule? Hi, Kathleen. If a divorce decree is re-negotiated on or after January 1, 2019, it will qualify for the new tax rule. Unfortunately, some states do not conform to the TCJA change in treatment of alimony. My understanding is that California currently will continue to tax alimony recipients, and allow deductions for alimony payers. Hi Leanne, you are correct that some states do not conform to the Tax Cuts and Jobs Act, and in those states, the treatment of alimony would be the same as it had been prior to tax reform. The article was written from a federal standpoint and doesn’t address state conformity. Kimberly, I would strongly encourage you to edit your original article (if possible) to clarify that each state may or may not follow this new Federal rule, and that each state may tax these monies differently. Many readers often do not peruse the comment section, and thus may miss this very important detail. I agree with Paul Adams, though, that the rest of your article is very clear and helpful. Thanks! Happy to make the update — thank you for the feedback! I like the simplicity of your deductible or non deductible alimony payments and receipts explanation for 2018 & 2019. I want to know if Mortgage Interest is deductible for 2018 tax year? Hi Susie. Please see our article “IRS Says Interest on Home Equity Loans Often Still Deductible Under Tax Cuts and Jobs Act” — it may help answer your question. Thanks! Browse Related Articles Practice Management ChatGPT for accountants Tax Law and News Tax breaks for victims of natural disasters Tax Law and News 7 warning signs ERC claims may be incorrect Advisory Services Building a 7-figure+ firm in less than 5 years Practice Management Offshoring tax and accounting services Tax Law and News Cost segregation and benefits to your clients Tax Law and News Register with IRS to monetize clean energy credits Practice Management ¿Cómo se comparan tus tarifas de preparación de impu… Advisory Services How a family office benefits your practice Practice Management How do your tax prep fees stack up?