Can I Deduct My Alimony Payments?

Marlana Caruso
By: Marlana A. Caruso
PublishedApr 5, 2023
3 minute read

Until 2018, the Internal Revenue Service (IRS) allowed paying spouses to deduct spousal support payments and required the receiving spouse to report those payments as income. However, the laws have changed for divorces finalized after Jan. 1, 2019. In this article, we delve into the complex intersection between taxes and alimony. 

Tax Laws and Alimony

Prior to 2018, alimony payments were tax deductible by the person making the payment and the receiving spouse had to claim alimony payments as income on their federal tax return.

That changed when Congress passed the Tax Cuts and Jobs Act of 2018. 

Now, alimony or maintenance payments associated with any divorce decree or separation agreement dated Jan. 1, 2019 or later are not tax-deductible by the person paying the alimony. 115 Public Law 97, 131 Stat. 2054

Additionally, the spouse receiving the alimony does not have to report it as income on their taxes.

Agreements Signed Before 2019

If you or your ex are contemplating modifying pre-existing alimony payments, you will want to speak to a lawyer about the potential tax implications and how your future alimony payments could be affected.

Updated alimony agreements must explicitly state that the repeal of the deduction for alimony payments applies to the new agreement. If that is not spelled out, then the tax burden remains on the recipient, and the payor continues to receive a deduction.

Colorado has adjusted its alimony calculations to account for the new tax law (we discuss this below). So you’ll want to find out from your attorney which scenario would benefit you the most if you’re thinking about a modification. 

How Colorado Adjusted its Alimony Calculations for the New Tax Law

As of 2014 (with the introduction of the maintenance guideline calculations), in order to determine an alimony amount, Colorado took 40% of the couple’s combined monthly adjusted gross income (AGI) and subtracted from that the lower income party’s monthly adjusted gross income. If the final number was a negative number, then the alimony is zero. C.R.S. § 14-10-114 (3)(b)(I)(A)

Here’s an example: 

Spouse A – $7,600/mo. AGI + Spouse B – $4,000/mo. AGI = $11,640/mo. AGI

$11,640 x .40 (40%) = $4,640

$4,640 – $4,000 = $640/mo. alimony payment

However, in 2018 the calculation was adjusted to account for the new tax laws as to alimony. Here’s how it’s calculated today: 

Colorado still uses the same calculation above, but then it adjust the alimony award by 75% for parties who have a combined monthly AGI between $10,001 and $20,000. C.R.S. § 14-10-114 (3)(b)(I)(C)

Using today’s calculations with the above scenario, the alimony payment would be $480. 

For spouses who have an AGI of $10,000 or less, the maintenance award is 80% of the calculated amount. C.R.S. § 14-10-114 (3)(b)(I)(B)

It’s Good to Know…

Colorado law allows judges to take into account the tax law and related adjustments when determining an alimony award: 

“Whether the maintenance is deductible for federal income tax purposes by the payor and taxable income to the recipient, and any adjustments to the amount of maintenance to equitably allocate the tax burden between the parties”  C.R.S. § 14-10-114 (3)(c)(XII)

What Counts As Alimony?

Not all alimony payments qualify as tax deductions. The IRS considers a payment to be alimony or maintenance if the following requirements are met:

  • The spouses do not file a joint tax return with each other. If you and your spouse file a joint income tax return together, you cannot deduct alimony payments.
  • The payment is in cash (including checks or money orders.) Colorado law allows for various forms of spousal support. One such form is in-kind payments to meet some or all of a spouse’s needs for food and shelter. In one Garfield County example, the wife received an in-kind payment in the form of a residence at the ranch where she kept her horses. In re Marriage of Rose, 134 P.3d 559, 560 (Colo. App. 2006) The IRS does not consider this alimony, and therefore the husband could not deduct the associated costs for tax purposes.
  • The payment is to or for a spouse or a former spouse made under a divorce or separation instrument. Make sure your divorce-related documents state the amount to be paid and label it as alimony, spousal support, or spousal maintenance. These documents should also clearly label the maintenance payments as tax deductible by the paying spouse and taxable to the recipient spouse.
  • The spouses are living apart and legally separated. Spousal support payments must be made after physical separation in order to qualify as tax deductible
  • There’s no liability to make the payment (in cash or property) after the death of the recipient spouse. Your divorce settlement must stipulate that maintenance payments end when the receiving spouse dies. The document can also spell out that the maintenance obligation ends when the paying spouse dies.
  • The payment isn’t treated as child support or a property settlement. Child support payments are not tax-deductible, so make sure that maintenance payments are not tied to support of your children. For example, if you and your former spouse have agreed that you will stop paying maintenance when your child reaches adulthood, the IRS may reclassify past maintenance as non-deductible child support. Then you would owe back taxes. 
  • The divorce or separation agreement does not designate the payment as not includible in gross income of the payee spouse and not allowable as a deduction to the paying spouse.

Source: Internal Revenue Service

Let Us Help

Divorce is already an uncomfortable process, and being unfamiliar with the new tax laws may compound that. If you are paying or receiving spousal maintenance, be sure to consult a lawyer before filing your taxes. Call 303-688-0944 today to begin your case assessment with one of R&H’s award-winning family law attorneys.

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