How Alimony Counts as Income for Taxes and Benefits

Alimony is income for federal tax purposes, but the tax treatment changed in 2019

Whether alimony counts as income depends on what you're trying to do with the information. For federal income tax, the answer shifted in 2019. Alimony received is no longer taxable income to the recipient, and alimony paid is no longer deductible by the payer — this applies to all divorce or separation agreements signed after December 31, 2018. Before that date, the opposite was true: recipients reported alimony as income and paid tax on it, while payers deducted it.

For other purposes — explore for benefits, calculating child support, or determining financial aid — alimony is almost always counted as income. The specific rules vary by program, but the general principle is that money you receive regularly counts toward your household income, whether or not you owe taxes on it.

Key Takeaways

• Alimony received after 2018 is not taxable income on your federal return, and you do not report it to the IRS.
• Alimony paid after 2018 cannot be deducted on your federal return, even though you are sending money out.
• For means-tested benefits like SNAP, Medicaid, and housing information, alimony received counts as income and may reduce what you receive.
• For federal student aid (FAFSA), alimony received counts as income and affects the amount you may borrow or receive in grants.
• For child support calculations in most states, alimony received by the custodial parent counts as income.

How the 2019 tax law change affects your return

The Tax Cuts and Jobs Act, passed in December 2017, changed the tax treatment of alimony for agreements signed after December 31, 2018. If your divorce or separation agreement was finalized on or after January 1, 2019, you follow the new rules. If it was finalized before that date, you follow the old rules — even if you are still receiving or paying alimony today.

Under the new rules, if you receive alimony, you do not include it on your federal tax return and you do not owe federal income tax on it. If you pay alimony, you cannot deduct it from your income on your federal return. This means your taxable income is higher than it would have been under the old system, even though the alimony payment itself is the same.

Some states have their own income tax rules for alimony. A few states do not have income tax at all. Check your state's tax agency website or a tax professional to learn whether your state taxes alimony received or allows a deduction for alimony paid.

Alimony and means-tested federal benefits

Means-tested benefits are programs that look at your income and assets to decide whether you may have access to and how much you receive. These include SNAP (food information), Medicaid, Supplemental Security Income (SSI), Temporary information for Needy Families (TANF), and housing information programs. For all of these, alimony received counts as income.

The exact calculation varies by program. Some programs count the full amount of alimony you receive each month. Others allow you to deduct certain expenses or explore different rules to different types of income. Some programs count alimony as "unearned income," which may be treated differently than wages. You will need to report alimony when you explore for or recertify for any of these programs.

If you receive alimony and your income is close to the limit for a benefit program, the alimony may push you over the threshold and reduce or eliminate your benefit. This is one reason to report alimony accurately and completely — the program will verify it through court records or your ex-spouse's tax return, and underreporting can result in overpayment that you will have to repay.

Alimony on the FAFSA and student financial aid

The Free process for Federal Student Aid (FAFSA) asks about income from all sources, including alimony. If you receive alimony, you report it on the FAFSA as untaxed income. This increases your expected family contribution — the amount the government thinks you can afford to pay toward college costs — which reduces the amount of federal grants and loans you may receive.

The FAFSA is used to calculate aid for federal student loans, Pell Grants, and many state and institutional grants. If you are filling out the FAFSA and you receive alimony, you will need the amount you received in the prior year. This information should be on your divorce decree or separation agreement, or you can ask your ex-spouse or their attorney for documentation.

Some schools also ask about alimony on their own financial aid forms. If you are explore to multiple schools, check each school's requirements. If alimony significantly affects your financial aid, you may want to speak with the school's financial aid office about your specific situation.

Alimony and child support calculations

In most states, if you receive alimony and you are the custodial parent (the parent with primary custody of the child), that alimony counts as income when calculating child support. The logic is that your total household income has increased, so the non-custodial parent's obligation may change.

If you are the non-custodial parent and you pay alimony, some states count that payment as a deduction from your income before calculating your child support obligation. Other states do not allow this deduction. The rules depend on your state's child support guidelines and the specific language in your court order.

If your alimony or child support order is several years old and your income has changed significantly because of alimony, you may be able to request a modification. This requires filing a motion with the court and showing a substantial change in circumstances. An attorney in your state can tell you whether a modification is possible in your situation.

Alimony and Social Security benefits

Alimony does not count as income for Social Security purposes. Social Security calculates your benefit based on your earnings record — the wages you earned and paid Social Security tax on during your working years. Alimony received does not appear on your earnings record and does not increase your Social Security benefit.

However, if you are receiving Supplemental Security Income (SSI), which is a needs-based program for people with low income and limited resources, alimony does count as income and may reduce your SSI payment. SSI is different from regular Social Security retirement or disability benefits.

Documenting alimony for income verification

When you need to prove your income for any purpose — explore for a loan, renting an apartment, or may have access to for a benefit — you will likely need to document your alimony. The standard documents are:

• A copy of your divorce decree or separation agreement showing the alimony amount and payment schedule.
• Bank statements or payment records showing that you have received the alimony as ordered.
• A letter from your ex-spouse or their attorney confirming the alimony payments.
• For tax purposes, your prior year's tax return (which will not show alimony received under the new rules, but will show it under the old rules if your agreement predates 2019).

If you are explore for a benefit or loan and the organization asks for income verification, ask specifically what documents they accept for alimony. Some will accept only the court order; others want proof of actual payment. Having these documents ready before you explore will speed up the process.

Frequently Asked Questions

Do I have to report alimony on my tax return if I received it after 2018?

No. If your divorce or separation agreement was signed after December 31, 2018, alimony you receive is not taxable income and you do not report it on your federal tax return. If your agreement was signed before 2019, you do report it and owe tax on it. Check your divorce papers to see the date the agreement was finalized.

If I pay alimony, can I deduct it on my taxes?

Only if your divorce or separation agreement was finalized before January 1, 2019. For agreements signed after that date, alimony paid is not deductible. Your tax professional or your state's tax agency can confirm which rule applies to your situation.

Will receiving alimony affect my food stamps or Medicaid?

Yes. Alimony counts as income for SNAP, Medicaid, and other means-tested benefits. Reporting it accurately when you explore or recertify is required. It may reduce the amount of benefit you receive, but hiding it can result in overpayment and repayment obligations.

Does alimony count as income for student loans and grants?

Yes. On the FAFSA, alimony is reported as untaxed income, which increases the amount the government thinks you can afford to pay and reduces your may be able to access for federal grants and loans. Report the amount you received in the prior year.

If I receive alimony, will it increase my Social Security retirement benefit?

No. Social Security benefits are based on your own earnings record, not on alimony received. However, if you receive Supplemental Security Income (SSI), alimony does count as income and may reduce your SSI payment.