Taxes from A to Z 2019: A is for upkeep


It’s my annual “Taxes from A to Z” series! This time it’s TCJA (Tax Cuts and Jobs Act) style. If you’re wondering whether you can claim home office expenses or deduct a capital loss under the new law, you don’t want to miss a single letter.

A is for keep.

For the past 70 years, alimony payments have been deductible by the payer and taxable as income for the recipient (it’s worth noting that some significant changes were made to the rules in 1984). Maintenance was previously deducted on the title page of Form 1040 as an “above the line” deduction on line 31a (black arrow), meaning that it was also available as a deduction for those taxpayers who did not provide information. And it was taxable for the recipient, reportable in line 11 (orange arrow).

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That has changed under the TCJA. Maintenance can now no longer be deducted under new agreements signed on or after January 1, 2019. This also means that it is not taxable for the recipient. However, if you have an older agreement, the tax treatment will remain unchanged unless you change the agreement after January 1, 2019 by explicitly referring to the new law.

Taxpayers also need to take a closer look to find out where to report alimony payments from the 2018 tax year (the tax return you are filing now in 2019). Do you remember the new schedules that were created to make up for the not-quite-postcard-sized return (more on that here)? Maintenance has been moved to Appendix 1, Additional Income and Income Adjustments (download as PDF). Maintenance payments will still be deducted in line 31a (red circle), while the corresponding maintenance income will still be shown in line 11 (green circle), only according to a new schedule:

Schedule 1 maintenance


To qualify as alimony for federal income tax deduction purposes, you must be divorced or subject to separation ordinance. You cannot live under the same roof as your spouse / ex-spouse when paying (unless you make a court-ordered exception), and you cannot do one in a year that you file a joint tax return with your spouse Claim maintenance. soon to be ex-spouse.

Maintenance payments must be made “to or on behalf of a spouse or ex-spouse under a divorce or separation instrument”. This includes an official divorce decree with mandatory support payments, a written separation agreement that requires such payments, or any other type of court order requiring you to support your spouse. The agreement or arrangement does not have to be permanent: temporary decrees, interim regulations (not final), maintenance regulations pendente lite (pending a final decree “during the procedure”) count.

Maintenance payments must be made in cash or in cash, e.g. B. by check or money order.

The maintenance obligation must not be voluntary. The IRS and you may have a different understanding of what “voluntary” is. Here’s a tip: if you have an official order or agreement, it’s not voluntary. But when you understand, you feel morally compelled to make payments because you’ve screwed things up or your ex-spouse is demanding that you pay something and just want to silence him or her, that’s voluntary and doesn’t count as alimony .

The payments may not be child benefit. Child benefit is tax neutral: it is neither tax deductible for the payer nor taxable as income for the recipient. Characterizing payments is not always yours: if you are in arrears with child support, the IRS will characterize payments to your spouse / ex-spouse as child support rather than child support regardless of what is stated in your agreement . If you are the payer, it means you lose the deduction.

Payments that qualify as property settlements do not count as maintenance. The same goes for payments or services to preserve your property, such as mortgage payments on a house or other property. For example, if your ex can live rent-free in a house that you are responsible for maintaining (including payments for mortgages, property taxes, insurance, and repairs), those payments are not alimony. And the value of the rent your ex isn’t paying to live there? Not even maintenance. What about an IOU to meet a real estate settlement obligation? Not upkeep. Here too, settlements do not count as maintenance, be it in a lump sum or in installments. Promises to pay, promissory notes or regular payment plans do not change that.

Payments that are part of your spouse’s income are also not considered alimony. That could come into play if you live in a community owned state like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin. State law determines whether your income in these states is separate or joint income.

Death changes everything. To qualify as alimony, you do not have to be required to make any payment (in cash or in property) after the death of your spouse or former spouse.

It is only support if the divorce or separation instrument doesn’t say it is not support. I know it’s doubly negative. If your settlement or any other arrangement negotiated as part of the divorce was carried out on the condition that it was not treated as alimony, you cannot treat it as alimony even if you believe it to be the case should.

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Further information on taxes from A to ZTM 2019 can be found again.

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