Is Alimony Tax Deductible in Virginia?

• What is alimony or spousal support?
• Are alimony payments tax deductible in Virginia?
• What criteria must be met for the payer to legally claim deductions for alimony?
• Not tax deductible in Virginia
• References

Alimony payments, also known as spousal support, may be tax deductible in Virginia, but only if your divorce was finalized before January 1, 2019. 

The payment must also be an alimony payment, not some other type of payment or asset exchange other than check, cash, or money order. If your Virginia divorce was relatively recent, it’s unlikely that your alimony payments are tax deductible. 

What is alimony or spousal support?

Spousal support, also called alimony, is a common type of court-ordered payment. During a divorce, a judge will determine if such a payment is appropriate based on the financial situations of the spouses and the specifics of their marriage. 

If the judge deems it appropriate, they will set an amount that must be paid by one ex-spouse (usually, the more financially stable person) to the other and for how long. These payments are usually temporary, although the amount of time a person is required to make these payments can vary significantly. 

If alimony is ordered, it isn’t optional. If you are ordered to pay alimony in Virginia, you must pay it or face legal consequences. If payment seems impossible or either party’s circumstances change significantly, it’s possible to get a modification in the order. If this applies to you, talk with a legal or financial professional about your options.

Are alimony payments tax deductible in Virginia?

The Tax Cuts and Jobs Act of 2017 (TCJA) impacted tax law when it comes to the deductibility of alimony payments.

A divorce finalized on or after January 1, 2019, falls under the new rules. A divorce finalized before that date falls under the old rules.

The old rules

Under the old rules, alimony payments were considered tax deductible for the payer. And, received alimony was considered taxable income for the recipient.

The new rules

Under the new rules, alimony payments are not tax deductible for the payer. And, received alimony is not considered taxable income for the recipient.

Note: It’s also possible for a divorce finalized before the cutoff to still fall under the new rules if it was later modified to explicitly say the new rules applied. 

What criteria must be met for the payer to legally claim deductions for alimony?

Assuming your divorce falls under the old rules, and you can still claim deductions for spousal support payments, a payment must meet the following other criteria to qualify:

1. It must be delivered in the form of a check, money order, or cash

For something to qualify as a spousal support payment, it must typically be made in the form of a liquid asset. You can make alimony payments via cash, check, or money order. You cannot give an ex-spouse a different type of asset as an alimony payment, even if the value of that asset is easily established (such as with stocks or bonds) and even if it is more than what is owed (such as via jewelry or houses). 

If you wanted to use these types of assets to pay your alimony, you would first need to sell them or otherwise exchange them for currency yourself.

2. Payments must be considered alimony payments

One obvious requirement for a payer to lawfully claim a payment was an alimony payment is that the payment must be legally considered an alimony payment. Financially supporting your ex-spouse isn’t enough. The payment must be court-ordered and at the amount required, not in excess of that amount. 

Put another way, you can’t pay more than required to get a bigger deduction. You also can’t claim that some other type of payment you made (legally required or not) was an alimony payment. 

3. The payer and recipient are not members of the same household

Alimony payments are meant to directly support the other party. For this reason, the payer and recipient cannot be members of the same household. Otherwise, an alimony payment could conceivably go right back to the payer.

4. Payment is no longer owed after the ex-spouse’s death

Alimony obligations end with the death of either party. If a payment obligation is considered alimony, you don’t have to continue paying a party’s heir or estate if the original receiver dies. You also cannot collect from a party’s heir or estate if the deceased had previously owed alimony. 

5. Payment isn’t treated as child support

An alimony payment cannot be treated as a child support payment. While sometimes confused, these are two completely separate types of court-ordered payments. 

There is no overlap. An amount of money paid to meet one obligation cannot also be counted as a payment to help meet the other obligation. In other words, an individual who owes both child support and alimony must pay the total of both amounts at the scheduled rate. 

Not tax deductible in Virginia

Like the rest of the U.S., in most cases, spousal support payments are not tax deductible in Virginia if the divorce was finalized on or after January 1, 2019.

Read: How 2017’s Tax Bill Changed How Alimony Is Taxed

References