One common tax myth is the belief that alimony payments are no longer deductible under any circumstances. This misconception can lead to incorrect tax filings and potential issues with the IRS. Here's what you need to know to stay compliant and avoid these pitfalls.

Origin of the Myth

• Tax Law Changes: The Tax Cuts and Jobs Act (TCJA) of 2017 introduced significant changes to the tax treatment of alimony, creating confusion.

• Lack of Awareness: There is often confusion about the specific dates and conditions under which alimony payments remain deductible.

Reality of Alimony Deductibility

• Pre-2019 Agreements: Alimony payments under divorce agreements finalized before January 1, 2019, are deductible for the payer and must be reported as income by the recipient.

• Post-2018 Agreements: Alimony payments under divorce agreements finalized after December 31, 2018, are not deductible for the payer and not taxable for the recipient.

IRS Guidelines on Alimony Payments

• Pre-2019 Divorce Agreements:

• Deductible: Alimony payments are deductible for the payer if the agreement was finalized before January 1, 2019.

• Taxable: The recipient must report the alimony as income.

• Post-2018 Divorce Agreements:

• Non-Deductible: Alimony payments are not deductible for the payer if the agreement was finalized after December 31, 2018.

• Non-Taxable: The recipient does not need to report the alimony as income.

Why the Myth Persists

• General Misconceptions: Many taxpayers are unaware of the specific effective dates and conditions under which the new rules apply.

• Anecdotal Advice: Misleading information and anecdotal advice from non-professional sources perpetuate the myth.

Avoiding the Pitfall

• Understand the Rules: Clearly understand the IRS rules for the deductibility of alimony payments based on the date of the divorce agreement.

• Pre-2019: Alimony remains deductible for the payer and taxable for the recipient.

• Post-2018: Alimony is not deductible for the payer and not taxable for the recipient.

What You Need to Do

• Review Divorce Agreements: Determine the date your divorce agreement was finalized to understand the tax treatment of alimony payments.

• File Correctly: Ensure that you file your taxes correctly based on whether your alimony payments are deductible or not.

Consulting a Tax Professional

• Seek Professional Advice: Consulting a tax professional can ensure you correctly identify and claim eligible deductions for alimony payments.

• Accurate Records: A professional can help you maintain proper documentation and navigate the complexities of the tax treatment of alimony.