TCJA Impact to Alimony Payments from Solo 401k Plans

In addition to impacting IRAs, the Tax Cuts and Jobs Act (TCJA) of 2017 (TCJA) also impacts alimony payments from solo 401k plans. Prior to 2019, the alimony payer (i.e. the solo 401k participant) received an above-the-line deduction and the recipient treated the alimony as income.  Now any divorce agreements adopted on or after January 2019 no deduction for alimony payments are allowed, and alimony payments are not treated as income.

This essentially means that the rules are now more favorable to the payee but results in higher tax liability to the payer (i.e., the solo 401k participant).  What is more, alimony payments no longer can be treated as earned income for the receiving spouse so the funds can no longer be used for IRA contributions purposes effective January 1, 2019.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 18 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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