With the new tax overhaul in late 2017 also came some interesting changes for spousal support and alimony payments. Set to take effect in 2019, spousal support and alimony payments will no longer be tax-deductible on federal income tax. Until this change, ex-spouses making support payments were eligible to deduct these payments from their taxes. The ex-spouse receiving the payment will no longer be taxed for the money they receive from the payment. Previously, they were taxed for these payments, as it was considered additional income.
It could be argued that this tax change mostly benefits the spouse receiving the alimony payments, but this will of course depend on the divorcing couple’s individual circumstances. In some cases, this tax change could hurt both parties.
If you are divorced or planning to get divorced in 2019, you must work together to create a spousal support payment plan that works best for both parties. Consult a Northern Virginia divorce attorney to learn how to best do this in the face of these tax changes.
Does This Affect Me?
In short, maybe. Because the law goes into effect in 2019, any divorces that are finalized by December 31, 2018 will not be affected. Any divorces finalized on or after January 1, 2019 will follow this tax change. The impact of the tax change for each couple, of course, will rely on each spouse’s current financial situation and assets.
If you are working on finalizing a divorce this year, understand that the current law will still stand: the person giving the payments can deduct them from their taxes, and the person receiving them will need to report them on their taxes. If you think you and/or your spouse would most benefit from waiting until after the law changes, consult with your spouse and a Northern Virginia divorce attorney to decide if waiting to file and finalize is the right move for you.
What Will Be the Long-Term Effects?
It is possible that this tax change will affect couples and the divorce industry in a few ways. Overall, because the new law seems to favor the spouse receiving the payments, divorcing spouses may be less likely to agree to making alimony or other spousal support. This could make divorce even more challenging and stressful than it currently is and put added strain on couples looking to reach an amicable agreement. The tax change could also affect how much spousal support or alimony is awarded.
Navigating a Divorce? Contact the Northern Virginia Divorce Attorneys at Dua Law!
Going through a divorce is difficult enough, and these upcoming tax changes could make it even more challenging. No matter if you want to finalize your divorce this year or wait until 2019, the Northern Virginia divorce attorneys at Dua Law can help you understand how this change may affect you, and help you make the best decision for you and your spouse. With many years of helping our clients successfully handle the overwhelming divorce process, you can trust that we will work for your best interests.