Is Alimony Taxable in 2021?

The simple answer is No. Because pursuant to section 11051 of the Tax Cuts and Jobs Act (TCJA) law relating to the taxation of alimony or divorce settlement was amended. Therefore, any alimony or separate maintenance payments made under a divorce or separation agreement which is executed on 1st January 2019 or later is fully tax-free in the hand of the recipient spouse. For this, fundamental change after 1st Jan 2019, the IRS no longer requires alimony recipients to declare the receipts as income.

Is divorce settlement payment tax deductible ?

Alimony or separation payments made for any divorce settlement executed on 1st January 2019 or after, are not deductible as an expense while computing your taxable income. This is because of TCJA 2017 which eliminated Code § 71 that provided law for deduction of payments of alimony or separate maintenance payment”.

What if divorce or separation agreement modified after 2018?

The new law applies to any divorce settlement agreement executed in 2018, and modified after December 31, 2018, provides the modification satisfies the following conditions:

  • modifies the terms and conditions of the alimony; and
  • The settlement agreement explicitly says that the alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.

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