You’re probably familiar with the term “alimony,” which is called “spousal maintenance” in Colorado. Spousal maintenance is financial support a higher-earning spouse pays to a lower-earning spouse during or after a divorce. The purpose of alimony is to help a dependent spouse become self-supporting after a divorce.
For decades, alimony was tax deductible for the paying spouse and counted as income by the receiving spouse, but as of January 1, 2019, the laws changed. Effective January 1, 2019, alimony is no longer tax deductible for the paying spouse, and it is no longer counted as taxable income by the receiving spouse.
2019 Changes in Tax Treatment of Alimony
“You can’t deduct alimony or separate maintenance payments made under a divorce or separation agreement (1) executed after 2018, or (2) executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Alimony and separate maintenance payments you receive under such an agreement are not included in your gross income,” according to the Internal Revenue Service.
In order for a payment to be counted as “alimony,” it must meet these requirements:
- The spouses cannot file a joint tax return together.
- The payment must be made in cash; however, this includes checks and money orders.
- The payment must be made by a spouse to a former spouse under a separation agreement or a divorce agreement.
- The spouses cannot live together when the payment is made, but special conditions apply.
- The paying spouse is not liable to make a payment in cash or property to the supported spouse in the event of the supported spouse’s death.
- The payment cannot be child support, nor can it be a property settlement.
The changes in the law that went into effect only affect legal separations and divorces executed after January 1, 2019. All separations and divorces executed on or before December 31, 2018 are grandfathered in with the old laws where alimony is tax deductible for the paying spouse and counted as taxable income by the supported spouse.
To speak with a Denver alimony attorney about your case, contact Jones Law Firm, PC at 303-799-8155.