As of 2019, alimony is going to be changing during tax season. After 2018, anyone who enters into a divorce will no longer be able to deduct alimony from their taxes. Those who receive alimony will not be taxed on it.
This is good for the people receiving alimony since they will pay less in taxes, but it is negative overall. It could have a serious impact on the amount of alimony a person is able to receive due to the person paying being taxed.
In some prenuptial agreements made prior to 2019, mandates state that alimony is taxed to the recipient and deductible to the payor. That isn’t possible with the new tax law, which means that the provision won’t be able to be honored by the courts. This will be one way to throw a wrench in the works for many people going through a divorce.
If you are paying alimony, you may want to settle your divorce before the end of 2018, so you can deduct it from your taxes in the future. If not, you will want to make sure you’re paying less in alimony to reduce your overall losses after 2019. If you’re the recipient, you may wish to wait until 2019 to receive alimony, since you won’t have it taxed. Keep in mind, however, that the person paying may not wish to pay as much since it is not tax deductible. It’s something you will need to negotiate carefully.
In a high-asset divorce, you’ll need to consider property division along with alimony, so keep the new law in mind to help better negotiate your options.