Photo of Professionals at McCoy Fatula, APC
Photo of Professionals at McCoy Fatula, APC

New tax law affects how alimony in a divorce will be handled

On Behalf of | Jul 6, 2018 | Divorce

The Tax Cuts and Jobs Act of 2017 that became effective on Jan. 1, 2018 affected many California residents and others around the country. While the Act addressed numerous issues, one notable topic dealt with how alimony, also known as spousal support, will be taxed. These tax changes will have a great impact on those couples who divorce in 2019.

According to reports, there are roughly 600,000 individuals across the nation who claim alimony when filing their taxes. Before the new law was enacted, the person paying alimony could deduct the amount from his or her taxable income. Conversely, the recipient was required to pay taxes on the alimony payments. For any divorce finalized after Dec. 31, 2018, this will change.

The payer of alimony will not be allowed to deduct the amount from income. The person receiving alimony will no longer pay taxes on the payment. The changes established in the Tax Cuts and Jobs Act law will assuredly have major implications for divorcing spouses as they negotiate financial settlements. Payers of alimony will most likely contend that they cannot pay as much because of the tax changes. This could create a situation where the recipient may not get adequate funds to maintain a current lifestyle.

Many couples are trying to finalize their divorce before the end of 2018 to avoid these changes. Those going through a divorce should contact a California lawyer for assistance with tax implications and other issues. A knowledgeable attorney can provide guidance and ensure that a client’s best interests are considered throughout every step of the divorce proceedings.

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