Payors and payees of spousal support know that the rules changed regarding how payments figure on income tax returns. Most Virginia residents know that alimony payments are not tax deductible and those receiving those payments do not have to claim the funds as taxable income. These new rules came into effect on Dec. 31, 2018.
What about divorces prior to 2019?
The deduction was eliminated from the Internal Revenue Code for divorces happening from 2019 through 2025. The deduction can still be claimed for most divorces finalized before Dec. 31, 2018. By the same token, alimony is still taxable income for the recipient in these instances. It is important to note, too, that alimony can be referred to as separate maintenance for couples who are not yet divorced, but separated.
Backtracking is possible
Payors who did not understand the rules when filing their 2018 tax returns may amend those returns, but only within three years of filing. For instance, a payor would have until April 2022 if his or her 2018 return was filed in April 2019. The Internal Revenue Service (IRS) may recapture any deductions it deems is not indicative of alimony. In this case, it would be added back to income and therefore, deemed as taxable.
The rules that accompany alimony payments can be complex and confusing to understand. Both payors and payees of alimony would be wise to seek the independent advice of a Virginia attorney experienced in family law — someone who could explain the laws and how they pertain to individual situations.