How A Divorce In 2019 Could Cost You More Than Anytime Since The 1930s
The new federal tax law may have you paying more overall for spousal maintenance (also called spousal support or alimony) if your divorce is finalized in 2019 or later. Deductions in place since 1942 will be eliminated, affecting both the payor and recipient of spousal maintenance.
Let’s take a dive into the law and what it might mean for you. And when you’re ready for legal advice, contact Jennifer Nixon.
New Tax Law & Spousal Maintenance
With the new federal tax law, spouses paying alimony won’t be able to take a deduction while those receiving spousal maintenance will no longer have to report it as income. This is a change from the prior law, where spousal maintenance was deductible to the spouse who pays and considered income to the spouse receiving maintenance.
It’s important to remember, if you’re starting the divorce process now that this change won’t affect those who finalize their divorce before 2019.
Since there will be no tax savings after 2019 for those paying spousal maintenance, the spouse who would be paying maintenance may want to pay less overall because they can’t deduct the payment from their income. Also, since the payment cannot be deducted, the payor will remain in the same higher tax bracket they are in without the payment, boosting government revenue. This may greatly increase the disputes over maintenance.
If spousal maintenance is a consideration in your case, it’s important to be protected with the most up-to-date information. Work with a lawyer who’s aware of the stakes.
Contact Jennifer Nixon to learn more about how this new tax law could affect your bottom line.