Alimony is defined as “payment of support from a spouse, who has the ability to pay, to a spouse in need of support for a reasonable length of time under a court order.” Paying alimony can be an expensive proposition for the payor and it is about to get more expensive thanks to the changes to the federal tax code.
At present, those paying alimony may deduct the payments on their federal taxes, while recipients must report them as income. However, the Tax Cuts and Jobs Act of 2017 (TCJA) reverses this. Beginning in 2019, alimony payments may not be deducted from the paying party’s federal income taxes. However, alimony payment recipients will no longer have to report them as taxable income.
So you may ask, what can I do if my current divorce will not be finalized by December 31, 2018? If you are considering, or currently undergoing a divorce, and would like to preserve the tax deductibility of alimony payments, contact a divorce attorney immediately. You may be able to write a simple divorce or separation instrument and execute the document prior to the end of December.
If you would like more information about the changes to the federal tax code and how it will impact your case, please contact our office for a free consultation.