Alimony Changes Under the New Tax Law
The new Tax Cuts and Jobs Act (TCJA) will change the way that alimony tax can be deducted for the paying spouse. Because spousal support payments can be a costly expense, tax deductions for the payer is an important financial issue, and any changes will have significant effects.
Before the new act was signed, payments that met the definition of alimony could be deducted by the payer for federal income tax purposes, while the recipient of alimony payments had to report the payments as part of their taxable income.
The old tax law will still be in effect for alimony payments that were agreed upon in divorce settlements made before 2019. Below, we explain how payments for post-2018 agreements will change.
Deductions for Alimony Payments Are Gone
TCJA eliminates the tax deduction for alimony payments. Spouses receiving alimony payments are no longer required to include alimony payments as part of their taxable income. In order for payments from divorces that are finalized before 2019 to qualify as deductible alimony, the payer will have to meet specific tax-law requirements. If the payer meets these requirements, alimony payments can be written off on the paying spouse’s federal income tax return.
If you are in divorce proceedings and want deductible alimony treatment for the payments you will be making to your ex, the new changes to the tax code should be an incentive to hurry up and get your divorce agreement finalized by 12/31/18.
If you will be receiving alimony payments from your ex, you will likely want to delay your divorce proceedings until next year, this way you don’t have to pay taxes on the payments you get.
No matter which situation you are in, you should consult with a divorce attorney to discuss how to address these new changes. Don’t make the mistake of waiting too long because you might end up being locked into an expensive tax situation.
At the Law Office of Robert W. Kovacs, Jr., we can help you make sure that the new tax changes don’t catch you off guard. Let us take a look at your divorce agreement and we can answer any questions you might have. Our attorney has assisted hundreds of families with their divorce settlements, and he is ready to help you today.
Call (508) 926-8833, or contact our Worcester divorce attorney to schedule an appointment today.