Here’s how divorce-related payments and settlements are treated for tax purposes in Tennessee (which follows federal tax law for most income taxes and itself has no general state income tax as of 2021):
1. Alimony / Spousal Support
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Federal tax law (for most recent divorces):
If your divorce or separation agreement was executed after December 31, 2018, alimony (spousal support) payments are not deductible by the payer and are not taxable income to the recipient. This change resulted from the Tax Cuts and Jobs Act (TCJA). -
If the agreement was finalized before January 1, 2019, the old rules might still apply (where alimony was deductible to the payer and taxable to the recipient), unless the agreement has been legally modified to reflect the TCJA treatment.
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Tennessee state income tax: Tennessee does not have a general income tax on wages or alimony, so there’s no additional state tax on alimony.
2. Property Settlements
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The division of marital property (like cash, vehicles, real estate, etc.) is generally not taxable income for the spouse who receives it. Property transferred between spouses or incident to a divorce is typically treated as a non-taxable transfer.
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For example:
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A transfer of equity or assets as part of a settlement is usually not taxed as income.
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If the asset (e.g., a home or retirement account) is later sold or distributed, you may have tax consequences then (like capital gains or retirement account distribution taxes), but the transfer itself isn’t taxable income.
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3. Child Support
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Child support payments (even if ordered as part of a divorce) are not deductible by the payer and not taxable to the recipient. This is true under federal tax law and in Tennessee.
Bottom Line
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Alimony: Not taxable income to the recipient and not deductible to the payer for divorces after 12/31/2018.
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Property settlements: Generally not taxable when transferred as part of a divorce.
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Child support: Not taxable nor deductible.
**Important: Individual circumstances can vary, especially with older agreements or complex assets (like retirement accounts). It’s wise to consult a tax professional or CPA familiar with divorce tax issues to ensure correct reporting. Additionally, a Tennessee divorce attorney can help you understand the nuances.