The Tax Act of 2017 changed how alimony is treated on the 1040 (tax return):
From the IRS: “Beginning Jan. 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018.
This also applies to a divorce or separation agreement executed on or before Dec. 31, 2018, and modified after December 31, 2018, as long as the modification:
- changes the terms of the alimony or separate maintenance payments; and,
- states that the alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.”
Because alimony payments were reportable as income prior to the change, they were picked up for FAFSA purposes through adjusted gross income. Since alimony is a reportable amount for FAFSA purposes, it now needs to be disclosed as the receiving parent’s “untaxed income” (alimony does not appear anywhere in the description of untaxed income or in the drop down box).