Alimony Tax Changes

Alimony Tax Changes

Alimony Tax Changes featured imageWhen the word “divorce” is brought up in conversation, many people immediately think of “alimony.” Alimony is a payment made by the higher earning spouse to the lower earning spouse, in the hopes that the money will help facilitate the ability of the lower earning spouse to set up a home and live independently. Although alimony is not a factor in every divorce, in 2015, 600,000 individuals reported to the IRS that they were paying alimony (Wattles, 2017).

Currently, spouses paying alimony can deduct it from their taxes, and spouses receiving alimony pay taxes on it, at a 15% rate. But this will only remain in place until December 2018. After December 31, 2018, the spouse paying alimony can’t deduct it, and the spouse receiving the money no longer must pay taxes on it. The new law does not apply to divorces prior to 2019. This creates the situation in which it is in the best interest of the higher earning spouse to file for divorce in 2018, but for the lower earning spouse to file in 2019. Although Boston-based family law attorney Regina Snow Mandl points out, “I’ve never heard a couple say that they’re getting divorced for tax reasons” (Associated Press, 2017).

The impact of the changes will be felt most by alimony payers (Wall Street Journal, 2018). However divorcing spouses, both alimony payers and recipients, should discuss the impact of the tax law changes with their attorneys and financial planners.

For guidance and support during divorce, contact the experienced family attorneys at Parra Harris Law, a full-service law firm in North Florida: 904-900-1617.

Associated Press (2017). Here’s How the Tax Plan Can Change Divorce in a Big Way. Retrieved from: https://nypost.com/2017/12/22/heres-how-the-tax-plan-could-change-divorce-in-a-big-way/

Wattles, J. (2017). Alimony payers lose tax deduction under GOP bill. Retrieved from: http://money.cnn.com/2017/12/15/pf/taxes/alimony-tax-bill/index.html

Wall Street Journal (2018, March). GOP Tax Plan: Live Coverage.  Retrieved from: https://www.wsj.com/livecoverage/tax-bill-2017/card/1513379555

 

Paola Parra Harris