by: Julia Rodgers
Congress' massive tax overhaul will affect virtually every corner of your life — even your divorce. The tax overhaul includes a provision that removes a 75-year-old tax deduction for alimony payments.
So, what does this mean for you?
Well, the new rules will not affect anyone who signs a separation agreement or divorces before December 31, 2018. However, for any divorce commenced after December 31, 2018, the rules will change. Under the new rules, the spouse paying alimony will not be able to take a deduction for it, and the spouse receiving alimony no longer has to pay taxes on it. The money used for alimony will be taxed at the payor's rates, which is usually higher.
Does this seem a little backwards to you? It may, because under current law the opposite is true- alimony is deductible to the higher income bracket spouse making payments and is treated as income to the recipient, who is usually in a lower income bracket.
As you can imagine, the current, older setup is more likely to preserve allocated funds for use between spouses, which in turn helps divorcing spouses afford to live separately. Under the new tax law, less money will be paid to the recipient spouse if the payor spouse is taxed on those alimony payments. Also, Massachusetts state tax law re alimony which mirrored the old federal tax law, has not changed yet. This could mean even more confusion on how best to figure a fair alimony number for both parties after December 31, 2018. Could it be more difficult to reach a reasonable alimony settlement? Probably.
Julia Rodgers is the firm's business director. Read related articles here. Remember, every case is different, and every set of facts is different, and therefore, the contents of this article do not provide legal advice or opinions.
Should you require legal assistance or have additional questions, please do not hesitate to contact Mavrides Law at 617-723-9900, or email us at info@MavridesLaw.com
Communication of information by, in, to or through this Web site and your receipt or use of it (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.