Given the choice, most people prefer not to think about taxes until the April deadline rolls around. The year 2017 was a bit different, though. Last year’s massive, nation-wide tax overhaul will affect millions of Americans’ taxes—and will likely have other important implications, as well.
Divorce is also something that most people prefer not to think about. But the new tax law could have a major effect on divorce—in particular, alimony payments. In this post, we will go over how the tax overhaul could affect alimony in a divorce.
The new rule
For 75 years, the national tax law allowed a tax deduction for alimony payments. The overhaul has scrapped that completely. A spouse who is making alimony payments will no longer be able to claim them as a deduction. Further, a spouse who is receiving alimony money will have their payments taxed.
How it could affect you
The rule will no doubt affect the alimony payments of hundreds of thousands of couples. Here are the major effects that it could have:
- There could be less spousal support awarded, as the money will go to taxes
- Negotiations between you and your spouse could be more difficult
- You may have less money from the alimony payments to live on
- Less money overall will be allocated between you and your spouse
When will it take place?
The new rule will not be applicable until Jan. 1, 2019. That means that couples whose divorces go into effect in 2018 will still be able to claim their alimony payments as a deduction and avoid counting it as taxable income. If you and your spouse are getting a divorce, you have until Dec. 31, 2018, for the divorce to be finalized if you do not want your alimony payments subject to this law.