Alimony Will Not Be Deductible In 2019
As part of the tax reform bill passed by the Trump administration in 2017, alimony (AKA spousal support) will no longer be tax deductible beginning January 1st, 2019. Currently, the spouse paying alimony is able to deduct those payments from their taxes. On the other hand, spouses receiving alimony will no longer have to declare that money as income starting next year.
Settle Your Divorce Now
If you are in currently in the middle of a divorce, and alimony payments are part of your divorce negotiations, now is the time to settle everything. If you wait until next year to finalize your divorce agreement, the money you pay will not be tax deductible.
The impact to high net worth individuals currently paying alimony, or negotiating payments of alimony will be especially heavy. Now is the time to speak with your divorce attorney, and probably your accountant too. Just in case.
Receiving Spouses Will Be Impacted Too
If you are the spouse currently receiving alimony, or negotiating how much you will receive in your divorce agreement, you should be cautious. While not having to pay taxes on your spousal support income will, in theory, increase your net income starting next year, there is a big caveat.
It is very likely that when this new law takes effect, it will have a substantial chilling effect on the amount of money your ex spouse will be willing and/or able to pay. The new law effectively removes the financial incentive (tax deductions) to be generous with alimony payments.
What To Do Before 2019
Again, right now is the time to go back to the negotiating table and hammer out an agreement before the end of the year.
At Vonder Haar Law, we’re seeing a huge amount of concern from our clients on both sides of the issue. Our suggestion is to contact your attorney and find out what this issue means in your particular case, and decide what appropriate action to take is.
If you are considering a divorce, but haven’t filed yet and are concerned about alimony, please contact our office. We’re happy to discuss your situation and help you understand the process and its impact on your life and finances.
REQUEST A FREE PHONE CONSULTATION
At Vonder Haar Law Offices, we offer every client a free phone consultation to discuss their unique situation and determine how we can help. To arrange a consultation, please fill out the adjacent form or call us at: (707) 529-3200.
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