With COVID-19, my salary has been reduced. I need to get my alimony reduced. I am paying court-ordered alimony of $2,100 per month. I am worried about the tax deduction for alimony if I seek a modification. I heard the law changed on the deductibility of alimony if you change your existing order. I really can only afford to pay $1,100 now, but I still need the tax deduction. Can I reduce my alimony and still get an alimony deduction for what I pay to my ex?
This modification situation can be tricky, but is doable. Technically, you need to approach the reduction correctly under the Tax Cuts and Jobs Act (TCJA). The TCJA eliminated the alimony deduction for new orders and agreements after Jan. 1, 2019. Still, TCJA provided a “grandfather provision” for your situation (if the requirements are followed precisely).
You need to file a motion with the court for alimony reduction based upon change of circumstances. You will need a new alimony court order to modify the old one (pre-Jan. 1, 2019). You cannot sidestep to a private agreement for alimony and maintain the deduction in all likelihood. Stay with the court order as the mechanism for the obligation. IRS Publication 504 (unofficial guidance) gives four examples; in following those examples, I think it is wise to stick to a court order for modification if the deductible alimony is in a court order. There is no official IRS guidance at the writing of this Ask Carolyn on the “grandfather provisions.”
Finally, unless your modified alimony court order elects to make your alimony non-deductible to you, you will continue to be able to deduct your alimony under the new court order.
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