Is Alimony Tax Deductible in Maryland?

After a divorce, alimony can give some financial breathing room to a former spouse with low earning potential. If you make alimony payments to an ex-spouse, you may wonder whether you can deduct those payments on your taxes. So, is alimony tax deductible? Find out below.

Alimony Under the Old Tax Code

Prior to 2019, Maryland considered spousal support payments taxable income. Accordingly, the recipient had to pay taxes on alimony, while the paying person could report alimony payments and deduct them on their taxes.

This arrangement benefitted spouses because their divorce attorneys could use alimony as a bargaining tool. Because alimony was tax deductible, one spouse might have been willing to pay more in exchange for something else they wanted, such as property or a vehicle.

All that changed with the introduction of the Tax Cuts and Jobs Act in 2017.

The Tax Cuts and Jobs Act Changed Alimony Classifications in Maryland

Is alimony tax deductible? Not since the Tax Cuts and Jobs Act of 2017 reclassified alimony payments as non-taxable income. This law took effect for divorces finalized after January 1, 2019.

What does this mean for former married couples? Recipients no longer have to pay taxes on alimony payments, which seems like great news at first because they’ll enjoy a lower tax bill.

But because the paying spouse can no longer deduct those payments, they’ll have less money to give their former spouse. That means divorce lawyers can no longer use alimony as a negotiating tactic as they once did.

It’s important to know that if you had a divorce agreement prior to 2019 and you change this agreement, your alimony payments may no longer be tax-deductible. Contact a Maryland divorce attorney to learn how the tax laws apply to you.

Types of Alimony in Maryland

Maryland recognizes three kinds of alimony:

• Pendente lite: With this type of alimony, one spouse will make payments to the other during divorce proceedings only.
• Rehabilitative alimony: A court may order rehabilitative alimony if one spouse lacks the skills and experience to support themselves. Alimony stops when the spouse has undergone enough training to find work that pays a livable wage.
• Indefinite alimony: The court might order indefinite alimony if a spouse will never be able to support themselves. For example, they may be disabled or too elderly to retrain for new work. Courts also order indefinite alimony to equalize the financial status of former spouses. Indefinite alimony payments typically stop when the recipient dies or remarries.

Is any type of alimony tax deductible? Regardless of the type of alimony, paying spouses cannot deduct their payments on their taxes.

Have Questions About Alimony? Ask a Maryland Divorce Lawyer 

Alimony can bring relief for the recipient, but those payments have tax implications for both former spouses. The experienced divorce lawyers at Jimeno & Gray, P.A., are here to answer any questions about alimony and child support you have. Call (410) 590-9401 to schedule a consultation today.