Divorce is Already Complicated Enough Without Including Taxes in the Mix.
Whether you’re paying or receiving alimony (or spousal support, as some nations call it), the following question always arises: Is alimony taxable? The answer is more complicated than you might have assumed, and it largely depends on where you are and when you signed the agreement.
What Is Alimony?
Alimony is a court-ordered financial payment one spouse makes to the other after a divorce or legal separation. It helps the recipient maintain a similar standard of living to what they had during the marriage, differing from child support which covers only a child’s needs.
For divorce agreements executed after December 31, 2018, alimony is no longer taxable income for the recipient and not tax-deductible for the payer at the federal level in the United States. However, for agreements made on or before December 31, 2018, the old rules still apply: alimony is generally taxable alimony for the recipient and deductible for the payer. This distinction is crucial, especially for older agreements.
Is Alimony Taxable?
Let’s take a look at how alimony is treated in some key countries.
| Country | Is Alimony Taxable to the Recipient? | Is It Tax-Deductible for the Payer? |
| United States | No (for agreements after 2018) | No (for agreements after 2018) |
| Canada | Yes | Yes |
| United Kingdom | No | No |
| Australia | No | No |
| India | Yes (if received as income) | No specific deduction |
| Philippines | Generally no | No |
United States: Timing Matters
If you’re in the US, the tax treatment of alimony changed dramatically after 2018.
Divorces finalized before Jan 1, 2019: Alimony is taxable income to the recipient and tax-deductible to the payer.
Divorces finalized after Jan 1, 2019: Alimony is not taxable and not deductible.
This new change was brought about by the Tax Cuts and Jobs Act (TCJA), and it has made a significant difference in the way individuals negotiate divorce agreements.
For example, if John settled his divorce in 2017 and pays $1,500 a month in alimony, he is allowed to deduct that on his tax return. If Maria settled her divorce in 2021 and receives $1,500 a month, she does not have to declare it as income.
Common Mistakes People Make
1. Confusing Alimony with Child Support
Child support is never taxable or deductible. Alimony might be—depending on your country and your agreement.
2. Not Knowing the Law in Your Country
Tax rules can differ wildly. What works in Canada could be completely different in Australia. It’s essential to research or ask a tax professional in your jurisdiction.
3. Not Keeping Records
Whether you’re paying or receiving, keep documentation. Bank statements, court orders, and signed agreements can protect you if there’s a dispute with the tax authorities.
Real-Life Story
“After my divorce in Toronto, I started receiving monthly support payments. I thought I didn’t have to declare it. Then I got a letter from the Canada Revenue Agency saying I owed back taxes. It was a stressful—and expensive—lesson.”
— Priya M., Toronto, Canada
What If You Move Countries?
Let’s say you were divorced in the UK, but you move to the US later on. Will your alimony still be tax-free? Generally, it depends on your tax residence. If you’re taxed in the US and you receive alimony under a UK agreement, you may still follow US tax rules. This is why it’s essential to consult both a family lawyer and a tax adviser when relocating.
People Also Ask (PAA)
1. Is alimony the same as a divorce settlement?
Not necessarily. Alimony generally involves periodic support payments. A lump sum divorce settlement is sometimes treated as alimony, but in other instances is not.
2. Do I need to pay income tax on a lump sum payment of alimony?
It depends on where you live. In some jurisdictions lump-sum support is taxable income. In others it’s tax free. Consult regional rules, or a tax attorney.
3. If I receive alimony, should I declare it in my tax return?
In the US (post-2018 agreements), no. In Canada or India, yes. Always confirm the rule in your country.
Frequently Asked Questions
- Can I deduct alimony payments from my income taxes?
Not in the US if your divorce was finalized after 2018. In Canada, you can. Rules vary internationally. - What if I don’t report taxable alimony income?
You may be subject to interest, penalties, and a tax bill from your local tax authority. - I remarried. Do I still have to pay alimony?
Usually yes, unless your divorce agreement says otherwise. However, in some jurisdictions, alimony ends when the recipient remarries.
Final Thoughts
So, is alimony taxable? It depends on your country, your tax residency, and the date of your agreement. While it may seem like a straightforward question, the answer involves legal and financial nuances that shouldn’t be overlooked.
If you’re unsure about your situation, speak to a qualified tax adviser or divorce attorney who understands both family law and international tax rules. A mistake here could cost you thousands—or worse, lead to legal trouble.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
