How Alimony Tax Works and What’s Changing in 2025

Divorce is rarely easy. Financial issues often make it even harder. Crucial tax questions arise when one spouse is required to pay alimony. How does the IRS treat alimony payments? Do you have to report them as income? Can you deduct them from your taxes?

For years, alimony payments were tax-deductible for the payer and taxable for the recipient. However, in 2017, the Tax Cuts and Jobs Act (TCJA) changed everything. For divorces finalized after December 31, 2018, alimony is no longer tax-deductible for the payer, and recipients don’t need to report it as income.

Many wonder if these rules will change again in 2025 or sometime after. That’s because several tax provisions in the TCJA are set to expire. However, the alimony tax changes are permanent, meaning the new tax treatment will remain in place.

In this guide, we’ll explain how alimony taxation has evolved, what remains the same after 2025, and what payers and recipients need to know.

What Is Alimony and Why Is It Important?

Alimony, also called spousal support, is a court-ordered payment from one spouse to another after a divorce. It is meant to provide financial stability for the lower-earning spouse. It is not the same as child support.

When determining who pays alimony and how much, courts consider:

• The length of the marriage
• The income and earning potential of both spouses
• The standard of living during the marriage
• The recipient’s need for financial support
• The payer’s ability to make payments

Alimony ensures that the spouse with lower earnings doesn’t suffer severe financial hardship after divorce. It is especially common in long-term marriages where one spouse may have sacrificed their career to support the family.

Before 2019, alimony payments were tax-deductible for the payer. For the recipient, they qualified as taxable income. However, that changed with the Tax Cuts and Jobs Act (TCJA), which removed tax deductions and taxability.

How Alimony Was Taxed Before 2019

Before the TCJA, alimony was treated as taxable income for the recipient and deductible for the payer. This meant:

• If you paid alimony, you could deduct the full amount from your taxable income, reducing your tax liability.
• If you received alimony, you had to report it as taxable income and pay taxes on it.

For example:

• John pays $2,000 per month in alimony under a 2015 divorce agreement. Before 2019, he could deduct the entire $24,000 annually from his taxable income.
• Sarah, his ex-wife, receives $24,000 per year and must report it as taxable income, paying taxes on it at her tax bracket.

This system provided a tax benefit to the higher-earning spouses who were paying alimony because they usually had a higher tax rate than the recipient. The government collected less overall tax revenue because the recipient often paid less tax than the payer saved with the deduction.

According to IRS Topic No. 452,

Alimony or separate maintenance payments received under a divorce or separation agreement executed before January 1, 2019, are considered taxable income to the recipient and deductible by the payer.

This rule applies to any divorce finalized before January 1, 2019, unless modified after that date.

How Alimony Is Taxed After the Tax Cuts and Jobs Act (TCJA)

In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which changed the taxation of alimony for divorces finalized after December 31, 2018.

• Payers can no longer deduct alimony payments from their taxable income.
• Recipients do not need to report alimony as taxable income.

This means that alimony payments are NOT tax-deductible if you divorced after January 1, 2019. In addition, recipients receive the full amount without tax obligations.

Why Did the TCJA Change Alimony Taxes?

Congress removed the alimony tax deduction to close a loophole that allowed high-earning spouses to lower their taxable income while shifting tax responsibility to the lower-earning recipient.

However, this change has been controversial because:

• It increases the financial burden on alimony payers since they lose a significant tax deduction.
• Courts may adjust alimony amounts to compensate for the lack of tax benefits.

This change has made negotiating alimony more difficult for many couples. The payer must now cover the full cost without tax relief. Naturally, this can lead to disputes.

What’s Changing in 2025?

The TCJA included temporary tax cuts and deductions. Many of these will expire in 2025. However, the alimony tax changes are permanent and will NOT revert to the pre-2019 rules.

A key detail to note is that while many provisions of the TCJA are set to expire at the end of 2025, this change to alimony taxation is permanent.

This means that after 2025, alimony will still not be tax-deductible for payers or taxable for recipients.

How State Taxes May Impact Alimony

Although federal tax law has changed, state tax laws vary. Some states still allow alimony deductions for payers and tax recipients on alimony income.

For example:

• California follows the old federal rule and still allows alimony deductions for state tax purposes.
• New Jersey does NOT allow alimony deductions at the state level.
• New York follows federal tax rules, so alimony is NOT deductible.

If you pay or receive alimony, check your state’s tax laws to determine if you have any state-level tax obligations.

Understanding Alimony Tax Rules: A Comparison

If you modify a pre-2019 alimony agreement, your tax treatment could change depending on the modification terms.

What Should You Do If You’re Paying or Receiving Alimony?

Review Your Divorce Agreement

• If your divorce was finalized before 2019, your alimony is likely still taxable/deductible unless modified.
• If finalized after 2019, your payments follow the new tax rules.

Consult a Tax Professional: Understanding state-specific tax laws is crucial. A tax expert can help navigate potential deductions at the state level.

Consider Renegotiating Your Agreement: If you have a pre-2019 agreement and are considering modifications, be aware that changes might impact your tax status.

FAQs About Alimony and Taxes

How did the TCJA change alimony taxation?

The Tax Cuts and Jobs Act (TCJA) removed alimony tax deductions for payers. It also made alimony non-taxable for recipients with divorces finalized after December 31, 2018.

Do these changes affect agreements made before 2019?

No. Unless modified, pre-2019 alimony agreements still follow the old rules. Payers can deduct payments, and recipients must report them as taxable income.

Will the alimony tax rules change after 2025?

No. The TCJA changes to alimony taxation are permanent, meaning they won’t revert to pre-2019 rules even if other tax provisions expire.

How do state taxes impact alimony?

Some states still allow deductions for alimony payments, even though federal tax laws do not. Check with a tax expert to understand your state’s rules.

What should I consider before modifying a pre-2019 alimony agreement?

Modifying your agreement may change its tax treatment. If your alimony order is modified after 2018, it could fall under the new tax rules, making it non-deductible for the payer and tax-free for the recipient.

Get Help Understanding Alimony Tax in 2025

Alimony tax rules changed significantly in 2019 with the TCJA. While many TCJA provisions will expire in 2025, alimony tax treatment will remain the same. This means that if you’re paying or receiving alimony, it’s crucial to understand how these tax laws apply to your situation.

At the Law Office of Steven M. Bishop, we specialize in family law and can help you navigate the complexities of alimony agreements and tax implications. If you need guidance, consulting a legal professional can ensure you make the best financial decisions for your future.