Divorce, like marriage, is taxing.
The sweeping new tax law that President Donald Trump signed in December could soon make paying alimony more expensive for some members of the roughly 800,000 couples getting divorced each year, according to government data. And divorce attorneys say that’s spurring a spike in clients considering divorce this year, thinking they might want to get it done before the new alimony provision takes effect in 2019.
To understand the new alimony provision, first, you’ll need to understand how alimony is currently treated for divorced spouses. Currently, the person paying alimony or spousal support may be able to deduct those payments from their taxes. Riemer gives a simplified example to show how much that could benefit the person paying alimony: “Let’s say you pay $20,000 a year in spousal support and are in the 33% tax bracket, the deduction will save you $6,600 per year.”
The new tax law will change all that. Beginning in 2019, if your divorce settlement is finalized in 2019 or later, you will no longer be able to deduct those alimony or spousal support payments from your taxes. In other words, by 2019, “the payors lose out on the tax deduction,” explains Citron — and that could mean that “the payor’s cost of paying alimony or spousal maintenance will be substantially higher.” Meanwhile, those who finalize their divorce in 2018 will get to deduct their spousal support and alimony payments for the entire time they are required to pay them. (On the flip side, divorce lawyers dealing with settlements in 2019 and beyond will think about the new tax implications and try to lessen their clients’ alimony payments to reflect that they aren’t tax deductible.)
These new rules also impact the person receiving the spousal support and alimony. While people who get divorced this year and get spousal support will have to pay taxes on it, those getting divorced in 2019 or later won’t, Riemer explains. She says this this could mean that the spouse who will be getting the spousal support “might slow play the divorce.”
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