Is Alimony Taxable in Indiana?

When you get divorced, your entire life is likely to change. One of the places you’ll probably see a significant change is in your taxes. When you are married, you and your spouse have the option of filing your taxes separately or jointly.

If you choose to file jointly, your income is considered to be one income in terms of your tax bracket, while filing separate returns means that your income will only reflect your own individual earnings.

With that being said, once you divorce, you’ll be filing as single or head of household, which will dramatically change the way you file your taxes if you filed jointly when you were married. But, your tax status isn’t the only thing that has changed. If you were ordered to pay alimony, or if you are receiving spousal support from your ex, this will need to be reflected when you file your tax return.

Filing Taxes as a Payer of Alimony

Previously, when you make alimony payments each month to your former spouse, these payments would be added as deductions to your tax return when you filed. This would work out in your favor when you file your taxes, as the more deductions you had, the more likely it was that your tax refund would be higher.

However, as of 2019’s Tax Cuts and Jobs Act (better known as Tax Reform), if you are the spouse paying alimony, you will no longer be able to deduct your payments on your tax refund and will instead need to absorb the costs.

How to File Your Taxes When You Receive Spousal Support

Similarly, prior to Dec. 31, 2018, the spouse who was receiving spousal support, would be required to report their alimony payments as taxable income on their tax return.

In many cases, those receiving alimony would then have taxes applied to the support they received. This would result in the payee owing the Internal Revenue Service (IRS) if they hadn’t planned ahead and had their taxes taken out of their paychecks over the course of the year.

All of this changed at the start of 2019, though. Now, those receiving alimony payments are no longer required to report their alimony payments as taxable income, which means the support you received from your ex is now tax-free.

Reach out to an Indiana Alimony Lawyer

The country’s tax reform laws will impact individuals in different ways. It is critical to note that any divorce that was finalized by Dec. 31, 2018 will still follow previous tax laws regarding alimony, and those who get a divorce from Jan. 1, 2019 on will file their taxes under the Tax Cuts and Jobs Act.

If you have further questions about how alimony will affect your tax refund, or if you want to work through the terms of your divorce with a regarded family law attorney at Rowdy G. Williams Law Firm, you can come in for a free consultation as soon as possible. Schedule yours today by calling our office at 1-812-232-7400 or by completing the quick contact form below.