We can imagine the concern everyone is having with a changing tax code, especially those who pay and receive alimony. The Alimony deduction rule has changed and depending who you ask—it could be good or bad. It will definitely change negotiation factors in divorce. So, what does this mean to you? Is my alimony deduction changing? Can I still deduct my alimony payments? Do I still have to pay taxes on the alimony I receive? Questions, questions, questions.
For years and years, the spouse who paid alimony received a full tax deduction, and the spouse receiving the alimony payments paid an income tax based on their tax bracket. This has been the case for years and it has been a key factor in most divorce negotiations.
BUT the tides are turning and changes have been put in place. Starting in 2019, the spouse paying the alimony will no longer receive a tax deduction, and the receiving spouse will not pay income tax on the alimony. In our opinion, the real-world consequences will likely make it more difficult to negotiate alimony payments and result in the receiving spouse being awarded less alimony per month as there is not a tax implication taken into account.
****Note that the change will not take effect until 2019, and will not apply to orders or those legally implemented between now and the end of 2018.
****If you have an existing divorce prior to 2019, and the agreement is modified after the initial date, the new rules will not apply to the modified judgement unless the modification expressly states that the new rules are to apply.
These changes may have wider impacts as the tax code is implemented and interpreted. Kendrick Law Group is not giving tax or legal tax advice; simply the opinions based on knowledge from tax attorneys and accountants. Please speak with a tax attorney or your accountant on how this possible change could affect you personally.
Kendrick Law Group is here to assist in Family Law related matters such as divorce, modifications, time-sharing, and much more. Contact our office today for a complimentary consultation: 407-641-5847.
Co-Written by: Samantha Sauer, Esq. and Kirsten Williams, Law Clerk