Legal Articles


Income Tax Changes for Spousal SupportBY ADAM DOLL| HOPKINS & HUEBNER, P.C. | ADEL OFFICE

In a divorce, Iowa law provides the Court may grant an order requiring spousal support, i.e. alimony, to either party of a divorce. Alimony may be ordered for a limited or indefinite length of time.  Generally, situations where alimony is awarded are in longer term marriages where one spouse is the primary breadwinner and the spouse seeking support has considerably less earning capacity.

Federal tax laws regarding alimony have been such that the payor of alimony can deduct alimony payments from his/her income for tax purposes. Likewise, the recipient of the alimony is required to report the amount of alimony received as income on his/her income tax return. However, for all divorce decrees in 2019 and beyond, things change quite dramatically. The Tax Cuts and Jobs Act (TCJA) eliminates the deduction for alimony payments after 12/31/2018 for post-2018 decrees. The payor of alimony will no longer be able to deduct the alimony payments from taxable income, and the recipient of alimony payments will no longer include the payments in taxable income.

It is important to note that for all divorces finalized in or before 2018, the income tax treatment for future alimony payments into 2019 and beyond will not change from how the payments have been treated before. The law is prospective in nature and will only apply to divorce decrees entered in 2019 and the future.

Due to this recent change, it has been advantageous in divorce proceedings for potential payors of alimony to try to accelerate the decree so that the judge enters an order in 2018. On the flip side, potential recipients of alimony would rather have the decree entered after 12/31/2018 so they would not have to report alimony as income.

Divorce can be quite stressful and generally unpleasant for both parties. However, not knowing the tax ramifications of alimony can amplify this stress, as this alimony deductibility change could mean substantial changes to your tax bill, which could be a distressing surprise. It is always advised that parties to a divorce seek legal assistance to address issues like this and various other issues that ultimately spring up in divorces.