Tax Hot Tip — Alimony Tax Treatment

As a reminder, the tax treatment of alimony has changed beginning in 2019.

 

If you or your clients pay or receive alimony under the old tax laws (i.e., the divorce agreement was entered into before midnight of 12/31/2018)*:

  • The payer will continue to deduct alimony amounts paid.
  • The receiver will continue to pay tax on alimony amounts received.

If you or your clients pay or receive alimony under the new tax laws (i.e., the divorce agreement was entered into after 12/31/2018):

  • The payer cannot deduct alimony amounts paid.
  • The receiver will not pay taxes on alimony amounts received.

 

* Note: If such an agreement is later modified after December 31, 2018 and:

  • The modification does not provide that the new tax laws apply to such modification, the tax treatment is the same as it was under the old tax law (i.e., payer can deduct alimony paid and the receiver will pay tax on alimony received).
  • The modification expressly provides that the new tax laws apply to such modification, the tax treatment going forward will be under the new tax laws (i.e., no deduction is allowed by the payer and the receiver will not pay income taxes on amounts received).

 

If you have any questions, IAG Forensics and Valuation is here to help!  Please contact Dan Branch — 770-635-1582 or dan@iagforensics.com.

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Dan Branch

Dan Branch is a graduate of the U.S. Naval Academy, has an MBA from Emory University’s Goizueta Business School, is a Certified Public Accountant (CPA), holds the Accredited in Business Valuation (ABV) certification from the AICPA, and also holds the Accredited Senior Appraiser (ASA) designation in business valuation from the American Society of Appraisers, and has over fifteen years experience in various types of financial advisory and business valuation engagements.

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