The Seven Rules of Spousal Support and Taxes

Our Chicago spousal support attorneys explain the rules regarding when to report payments and situations in which alimony is tax deductible.

Spousal support may be awarded as part of divorce proceedings in Illinois. It is common in cases where one spouse makes considerably less than the other or sacrifices their own career or education for the marriage. These payments can help to ensure you continue to enjoy the same lifestyle as you did during your marriage while also helping to obtain the skills, experience, or education needed to re-enter the workforce. 

If you are either receiving spousal support or making payments, it is important to be aware of potential tax ramifications. Our Chicago spousal support attorneys explain when it needs to be claimed as income and the rules regarding using payments as tax deductions.  

Do I Need to Report Spousal Support on My Taxes?

In the past, spousal payments were tax-deductible, and the receiving spouse was required to report any payments as income on their federal tax returns. This changed when the Tax Cuts and Jobs Act of 2017 (TCJA) was enacted. It eliminated both the reporting requirements and tax deductions for spousal support for anyone who got a divorce after January 1, 2019. 

If you divorced before this and have an order of spousal support in place, you may still be subject to the former tax rules. As both spousal support deductions and tax payments on the amounts received could represent significant amounts of money, it is important to discuss the matter with an experienced attorney, as well as with trusted tax professionals. 

IRS Rules Regarding Spousal Support in Chicago

The Internal Revenue Service (IRS) provides clear guidelines regarding spousal support and taxes. If a spousal support order was entered before the 2019 deadline, it is important to claim it as income, and you are liable for taxes owed on any payments received. If you are the one paying spousal support in Chicago, you may be entitled to a tax credit. The following are seven rules for claiming this deduction:  

1. You must be currently living separately and apart from your spouse. 
2. You must file separate tax returns. 
3. Spousal support payments must be required by a marital settlement agreement or final divorce order. 
4. Payments must be for spousal support specifically and not child support or part of a property settlement. 
5. You must specify when payments end, typically upon the recipient’s death. 
6. You can only deduct payments made by cash or check. 
7. You can only claim what is currently due and paid. Avoid front-loading, or making excess payments for the purpose of obtaining tax benefits. 

Discuss Your Case With Our Chicago Spousal Support Attorneys

To find out more about your rights and obligations regarding spousal support payments, reach out to the Women’s Divorce and Family Law Group. Call or contact our Chicago spousal support attorneys online and request a consultation to discuss your case today.