If you are currently going through divorce, you might need to speed up the process. This is because The Tax Cuts and Jobs Act that was passed by Congress last December will eliminate alimony, now called maintenance, deductions beginning on Jan. 1, 2019.
Before the passage of this act, alimony could be deducted by the paying spouse on their federal income taxes, while the spouses who receives alimony had to report the payments as part of their taxable income. The old tax law will continue to apply for alimony payments that are part of divorce agreements reached before 2019. This means that if you are already paying alimony to your spouse, you won’t be affected by the new changes. You will still be able to deduct your alimony payments from you taxes and your spouse will still need to claim your payments as part of their annual income, pursuant to the divorce judgment entered prior to January 1, 2019.
Generally, the spouse who receives alimony earns less than the paying spouse, which should place them in a lower tax bracket. However, as of January 1, 2019, the new tax law will shift the tax burden to the higher earning spouse. If you don’t finalize your divorce by December 31, 2018, your divorce will have to follow the altered guidelines stipulated in the Tax Cuts and Jobs Act.
Tax writers in Congress are claiming the change is equitable for married couples, while the IRS says the new law will add about $6.9 billion in tax revenue to federal coffers over the next decade.
However, divorce lawyers say the changes will have significant implications. For one, the changes will make it more difficult for spouses to negotiate because the spouse who gets stuck with the alimony obligation will want to pay less in order to offset the increased tax burden. This means divorces will drag on longer and become more expensive.
If your divorce proceedings are still in progress and you want to be able to deduct alimony from your taxes, The Tax Cuts and Jobs Act should motivate you to wrap up your divorce and get your agreement signed by December 31, 2018.
If you will likely be the recipient of alimony payments, it might be in your best interest to delay your proceedings until next year, this way your payments will be tax-free.
Get Help From Our Divorce Attorneys
At Galmiche Law Firm, P.C., we have more than 30 years of legal experience handling divorce cases. We can review your case and determine a legal strategy that will produce the best results possible. We are dedicated to providing our clients strong legal representation throughout every step of the divorce process. Let us get to work for you today.