For over seven decades, alimony has been tax deductible for the paying spouse and counted as taxable income for the receiving spouse, but thanks to the Tax Cuts and Jobs Act, on January 1, 2019 all of that changed.
Under the new law, all spouses who enter into a divorce agreement on or after January 1, 2019, alimony (spousal support) payments will no longer be tax deductible for the paying spouse, nor will it be counted as taxable income for the receiving spouse.
What About Modifications?
Suppose you entered into a divorce agreement on or before December 31, 2018, and you wanted to modify the existing alimony order so it was more or less than before. What does that mean to you? Will the old law apply, or will the new law apply? For all divorce agreements entered into on or before December 31, 2018, the old law will apply unless the spouses used specific language that clearly stated otherwise.
For example, if John agreed to pay $400 a month in alimony to his ex-wife in July of 2018 and he sought and obtained a downward modification in November of 2019, he can still deduct his alimony payments since he entered an agreement under the old law.
Can I Deduct Child Support Instead?
For about 75 years, alimony was tax deductible for the paying spouse and counted as taxable income for the receiving spouse, but all the while, child support was not tax deductible, nor was it taxable income. Now, alimony and child support are quite similar tax wise. So, no, you cannot deduct child support and your ex cannot be taxed on it.
The 2019 tax changes to the alimony law are affecting wealthy individuals the most because they can no longer use the tax deduction as a bargaining chip during negotiations.
Related: Can Child Support Arrears Impact International Travel?
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