New changes to the tax code that will go into effect at the end of this year has people asking questions about how their divorce settlement will be affected. Below, we explain what the new changes to alimony tax are and how these changes might impact you and your family.
In the past, alimony has always been deductible for the person who pays spousal support. In turn, the recipient spouse payed taxes on the payments they received. However, new changes that have been made to the tax code will halt this consistency. Under the Tax Cuts and Jobs Act, any divorce that has been finalized after Dec. 31, 2018, will no longer be eligible for the alimony tax deduction for the payer spouse. Another change included in the new act is that the recipient spouse will no longer have to pay tax on the alimony payments they receive.
Naturally, these changes have created concerns for people who will be getting divorced in 2018, and most attorneys believe that divorce will become even more complicated in the coming years. For one, the tax relief that the alimony payer used to receive was often an incentive that would make divorce negotiations move along at a faster pace. Now that this incentive has been eliminated under the new tax code, lawyers anticipate that more divorces will wind up needing litigation in court.
In addition to losing the tax incentive, people looking to get divorced after this year will have to think about how the new tax changes will impact them as a single household. Before, the paying spouse would get tax relief because they were giving a portion of their income to a spouse who earned less. Without the tax benefit, divorce will become less affordable for many couples looking to separate. This can potentially increase the amount of people who choose to stay in unhappy marriages.
If you are wondering how the new tax code changes will affect your divorce moving forward, or if you want to change your existing divorce agreement to align with these changes, you should consult with an experienced divorce attorney.
At L. Patrick Mulligan & Associates, LLC, our team of skilled lawyers can review your divorce settlement and advise you on the best way to approach these new changes. These new tax code changes can have a substantial impact on your financial stability, so you should immediately consult with us if you have any questions or concerns about your divorce agreement.Call (937) 685-7006, or contact our Dayton team of divorce attorneys to get started today. We are available 24 hours a day, 7 days a week.