The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) overhauled the U.S. tax code, including changes to the tax rules for alimony. One crucial change is the IRS’ treatment of alimony payments. Currently and until the beginning of the new year, §71 of the Internal Revenue Code provides for a deduction of payments that meet the definition of “alimony” to the payor. On the other hand, the payee must include the amount of alimony payments in their gross income.  

Upon welcoming the new year in 2019, alimony will neither be deductible to the payor nor included in the payee’s gross income for any divorce or separation agreement executed after December 31, 2018. Importantly, there ­is not an exception for pre-existing divorces and separation agreements that are modified after 2018, expressly providing that the repeal of qualified alimony and separate maintenance rules apply. Thus, from January 1, 2019 forward, alimony will be treated the same as child support payments for federal income tax purposes.

This modification to the I.R.C. likely stems from the IRS’ desire to increase tax revenue. The TCJA will likely accomplish the IRS’ goal due to the fact that the payments will now be taxed at the payor’s tax rate, rather than at the recipient’s tax rate, which is generally lower than the payor’s tax rate.