Connecticut doesn’t have the highest number of divorces when compared against other states. Only 10.6 percent of the population are divorced according to the U.S. Census Bureau. But if couples in Connecticut are contemplating divorces, their attorneys may advise them to do it before the end of 2018.
Why? Because the new tax reform includes changes to how alimony payments are treated at tax time; however, those changes will not take effect until Jan. 1, 2019. Those who are already paying alimony will see no changes by the new alimony tax laws when they come into affect.
You are probably asking just what those changes are? The current tax laws regarding alimony — which has been in effect for the past 75 years — allows an individual to deduct the amount of alimony he or she pays from their total income for tax purposes. The recipient of the alimony currently pays taxes on the alimony received at a 15 percent rate.
In the reformed tax laws, the tax deduction for alimony paid will be eliminated, meaning the payer will be taxed on that money at his or her normal tax rate. The recipient of the alimony will no longer have to pay taxes on the money.
The money will be taxed at a higher rate (per the higher earner). This will mean more money for the government, which is presumed to help make up for some of the other tax changes that result in less incoming revenue.
When it comes to divorce settlements, tax consequences for alimony have always been a part of the negotiation perks for the one having to pay alimony. Divorce attorneys will need to be on top of these changes and how they will affect those negotiations. In the meantime, those contemplating divorce might want to seek legal advice now to decide if a 2018 divorce might be the best move.
Source: the ct mirror, “Tax bill may make 2018 a wild year for CT divorces,” Ana Radelat, Jan. 15, 2018