New Federal Tax Plan Means Changes to Rules about Alimony

The 2019 tax plan involved some extreme changes that will affect alimony payments, from January 1st, 2019 onward.

What Did The Old Laws Say?

Prior to January 1, 2019, if a couple divorced or separated, the spouse who paid the alimony will now be able to deduct it from his/her taxes, potentially lowering his/herself into a lower tax bracket. As well, if the person receiving alimony was to pay taxes on the money collected, same as if it were income.

What Does The Laws Say Now?

Beginning in 2019, the individual who pays the alimony can now no longer deduct it from their taxes. And, the individual receiving alimony no longer needs to declare it as income.

Divorce Order Before New Alimony Rules Take Effect

Las Vegas family law attorney, Ishi Kunin, reported that the payer, usually a man, will now be more negatively affected by the inability to receive the tax benefit. However, Kunin said, “…Big picture, the courts can now order amounts that are significantly less by considering this new tax implication, so there may not be any actual impact.”

More Power to the Judges

That seems to put a lot more responsibility into the hands of judges. Kunin reported that her gut feeling is simply that judges will look at the numbers without regarding the tax effect.

To make the intensity of this change more apparent, Kunin gave the following example. If the spouse is paying $5,000 a month and cannot deduct it, that $5,000 is more like $7,000,” she said.

Changing 75-Year-Old Rules

Divorce orders that exist before January 1st, 2019 but are not modified after that date will continue with the current pre-change rules — rules that have been in place for 75 years. So why did the law change on January 1, 2019?

According to The Associated Press, the House Ways and Means Committee described the existing alimony deduction as a “divorce subsidy” because a divorced couple may pay less in their combined taxes than a married couple. It is also important to note that the new rule will add approximately $6.9 billion in new tax revenues over the next ten years.

About Child Support

Laws regarding child support are not changing as a result of this alimony change. Child support is still not tax deductible.


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