For decades, those paying alimony or spousal support have been allowed to deduct the amount of support from their federal taxes, and those receiving support had to pay taxes on the amount of alimony received.
According to the new tax bill passed in December 2017, however, that is all about to change for any divorce agreement or modification to a divorce agreement made on or after January 1, 2019.
What This Means If You’re Getting Divorced
There are several different ways this affects how alimony is taxed. Specifically, it means:
- For any divorce proceeding that begins after December 31, 2018, the spouse paying the alimony is taxed on that money, and the spouse receiving the money is not taxed on the support that is received.
- Divorce proceedings may become more complicated, costly, and adversarial. The higher-earning spouse is more likely to contest the award or amount of support since he can no longer claim the tax deduction.
- This may result in less money to share between the two households. The spouse that is paying the support may have a higher tax rate than the spouse receiving support. Thus, more money is going to the government, and less is being kept by both spouses.
No one gets divorced for tax purposes. However, if you are considering a divorce, it is important to fully understand all of the tax implications that the divorce may raise. Our experienced divorce attorneys will explain everything you need to know about these new tax changes. This includes any further changes that may be made to the tax code that could impact alimony, child support, the division of marital assets, or any other financial aspect of your marriage dissolution. Please contact us today via this website or by phone to get your questions answered or to schedule a meeting with one of our experienced lawyers.