A long-time taxation standard has allowed those paying alimony to deduct the expenditure from their total taxable incomes. Meanwhile, the recipients of alimony were the ones who needed to make the tax payments on that money.
Now, as of 2019, the situation will be reversed. Those paying the alimony will need to pay the income tax, and those receiving the alimony will not.
However, if your divorce finalizes before 2019, or if it is already finalized, the current taxation rules will continue to apply to you. Those already paying alimony can continue to deduct the expense from their taxes.
Because this change will impact the way certain ex-spouses are taxed, some spouses are trying to get their divorces pinned down before the new year. Meanwhile, other spouses are trying to delay the settling of their cases — particularly the ones who stand to receive alimony. By settling in 2019, the recipient spouse will not need to pay taxes on his or her alimony income.
Ultimately, divorcing spouses should not worry too much about the new rules, as they will be able to organize their divorce and alimony settlements in such a way that accounts for the taxes that need to be paid. It could be that alimony settlements will be less in value in the future to account for the fact that the receiving spouse no longer needs to count the payments as income.
If you have questions about your alimony case and how the new tax laws in 2019 could affect your situation, our law office is available to fill you in on the details of the law as they apply to your divorce and help you understand your choices.