Can Alimony be Deducted from State Taxes in Illinois?

When the Tax Cuts and Jobs Act of 2017 was passed, many of its provisions caused an uproar around the country. One of the main points of contention was that the alimony tax deduction was removed. Up until that point, someone paying alimony could deduct those payments from their federal tax returns. Likewise, those receiving it could claim it. It was a tax break that allowed for savings, and for more amicable divorce negotiations. With the new law, payers can no longer deduct it, and payees are no longer required to claim it.

The old law still applies to anyone that had a divorced finalized before January 1, 2019. Those that will finalize their divorce after that date though, must follow the new rules. In addition, anyone modifying their alimony payments after January 2019 could also face restrictions under the new law.

The new law has already caused trouble for many. Once, those paying alimony were willing to make larger payments, knowing they would receive a tax benefit at the end of the year. Those receiving it were often willing to take less in alimony payments, as it would also save them from claiming it as income on their federal tax returns.

“The new law certainly had people thinking at the end of last year,” says Brian W. Re i dy of Reidy Law Office, LLC. “It had many couples scurrying to finalize while they could still take advantage of the tax law. Unfortunately, for anyone facing divorce in the future, there is no way around the new legislation.”

In Illinois, tax laws were also changed to reflect the new federal law. That means those in Illinois cannot look towards their state tax returns to receive the deduction, either. Many in other states can, though. Alabama, Arkansas, Mississippi, New Jersey, and Pennsylvania are just a few of the states that have adopted only selective parts of the new federal tax rules.

It is important that anyone considering divorce check the rules of their state. With everyone so focused on the changing federal law, some overlook the fact that state law may still apply. And it could still provide big benefits in regards to alimony payments.

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