Is Spousal Maintenance Taxable in Illinois? Pre- and Post-2019 Rules

Whether spousal maintenance is taxable in Illinois depends entirely on one date: December 31, 2018. If your divorce or separation agreement was executed after that date, maintenance is tax-neutral — the payer cannot deduct it and the recipient does not report it as income, on either the federal or Illinois return. If your agreement was finalized on or before that date, the old rules still apply: the payer deducts the payments and the recipient reports them as income.¹

Post-2018 Agreements: Nothing to Report

For any divorce or separation instrument executed after 2018, maintenance payments do not appear anywhere on either party’s tax return. The payer gets no deduction. The recipient owes no tax on the money received. This applies to federal taxes and, because Illinois follows federal treatment, to state taxes as well.

The change came from the Tax Cuts and Jobs Act of 2017, which repealed the two Internal Revenue Code sections that had governed alimony taxation for decades. Section 71 required recipients to include alimony in gross income.² Section 215 allowed payers to deduct it.³ Both went away for post-2018 instruments.

The practical effect is that the payer bears the full tax burden on the income used to fund maintenance. Before the change, a payer in a higher tax bracket could deduct the payments, and the recipient — often in a lower bracket — paid tax at a reduced rate. That built-in tax advantage no longer exists for newer agreements, and it changes the real cost of any maintenance figure negotiated today.

Pre-2019 Agreements: Old Rules Still Apply

Agreements finalized on or before December 31, 2018 are grandfathered. The payer deducts payments on their federal return, and the recipient includes them in gross income.¹ That treatment continues indefinitely as long as the agreement stays in its original form.

The reporting mechanics:

Payer: deduct maintenance paid on Schedule 1 (Form 1040) and enter the recipient’s Social Security number or ITIN. Failing to include the SSN can cost you the deduction and a $50 penalty.
Recipient: report maintenance received as income on Schedule 1 (Form 1040). You must provide your SSN to the payer, or you also face a $50 penalty.

The IRS cross-references the two figures using each party’s SSN. When the payer’s deduction and the recipient’s reported income do not match, both parties can expect correspondence, and the recipient risks owing back taxes plus interest on unreported income.¹

Modifying an Older Agreement

Modifying a pre-2019 agreement does not automatically switch you to the new rules. To move to post-TCJA treatment, the modification must both change the terms of the maintenance payments and explicitly state that the TCJA repeal of the alimony deduction applies.⁴ Without that specific language, the old tax treatment continues even after you modify. Whether to include that language is a real negotiation point: switching benefits one party and hurts the other, depending on your respective brackets.

Why Illinois Treatment Follows the Federal Answer

Illinois calculates state income tax starting from federal adjusted gross income under 35 ILCS 5/203. Because federal AGI already reflects whether maintenance was included (pre-2019 agreements) or excluded (post-2018 agreements), Illinois inherits the same treatment without a separate state rule. There is no Illinois-specific maintenance deduction or inclusion.

What Actually Counts as Maintenance

Not every payment between former spouses is treated as maintenance for tax purposes. For pre-2019 agreements where taxability still matters, the IRS applies a specific set of requirements. The payment must be in cash, check, or money order; it must be required by a divorce or separation instrument; the spouses cannot file jointly with each other; if legally separated under a decree, they cannot share a household when the payment is made; the payer’s obligation must end at the recipient’s death; and the agreement cannot designate the payment as something else, like child support or a property settlement.¹

Payments to third parties on behalf of a former spouse, such as mortgage payments or insurance premiums, can sometimes qualify. Payments to maintain the payer’s own property do not. If your agreement requires you to pay the mortgage on a home you still own, that payment is not deductible maintenance regardless of when the agreement was signed.

Child Support and Property Transfers Are Different

Child support is never deductible by the payer and never taxable to the recipient, no matter when the agreement was executed.⁵ If a single payment covers both maintenance and child support and the agreement does not clearly separate them, the IRS treats the entire amount as child support first.

Property transfers between spouses incident to divorce are also not taxable events under 26 USC 1041.⁶ The recipient takes over the transferor’s tax basis. If you receive the family home in the divorce, you are not taxed on the transfer itself, but when you sell later, your gain is calculated using your former spouse’s original cost basis rather than the home’s value at the time of divorce.⁷

The Recapture Rule for Front-Loaded Pre-2019 Payments

One trap catches payers under pre-2019 agreements who front-load maintenance. If your payments decrease substantially or stop during the first three calendar years, the IRS may require you to recapture part of what you previously deducted, meaning you add it back to your income in the third year.⁸

The rule kicks in when payments drop by more than $15,000 from the second year to the third, or when the first-year payments are significantly higher than in the following two years. The three-year period begins with the first calendar year you make a qualifying payment under a final decree; temporary support orders do not count.⁸

The recapture amount gets reported on Schedule 1 in the third year. The payer adds it back as income; the recipient gets to deduct the same amount. Publication 504 includes a worksheet to calculate the figure. If your pre-2019 agreement includes a step-down schedule, run the recapture calculation before relying on the deductions you took in years one and two.

1
Internal Revenue Service. Topic No. 452, Alimony and Separate Maintenance
2
Office of the Law Revision Counsel. 26 USC 71 – Repealed
3
Office of the Law Revision Counsel. 26 USC 215 – Repealed
4
Internal Revenue Service. Divorce or Separation May Have an Effect on Taxes
5
Internal Revenue Service. Alimony, Child Support, Court Awards, and Damages
6
Office of the Law Revision Counsel. 26 USC 1041 – Transfers of Property Between Spouses or Incident to Divorce
7
Internal Revenue Service. Tax Considerations for People Who Are Separating or Divorcing
8
Internal Revenue Service. Publication 504 – Divorced or Separated Individuals