Changes in tax laws are nothing new. They happen all the time. However, when a long-standing law changes, it draws a lot of attention. That is exactly what happened when the laws changed regarding the taxation of alimony payments. Since this is a federal law, it affects everyone, so if you receive or pay spousal support in Tennessee, then you need to understand the changes.
According to Forbes, the alimony tax law changes took effect in 2019. Prior to this, the paying spouse could write off payments as an expense, and the spouse receiving payments included it as income. After the change, though, nobody includes spousal support on their taxes.
This is important because it changes the tax burden. Under the old law, the lower earning spouse, who was receiving the payments, paid the taxes at a lower tax level. This saved the higher taxed spouse who paid the payments from the tax burden.
States vary in how they handle support, but Tennessee follows federal law, making alimony not taxable. This may seem easier overall, but it changes things drastically. If you pay support, then you cannot deduct it from your income, making your income and tax obligations higher. If you receive support, you lose out on the income boost that could qualify you for higher credits.
The good news if you liked including your alimony payments on your taxes is that if you divorced prior to the introduction of the new law, then you can follow the old law. This information is for education and is not legal advice.