If you are either (a) presently paying alimony, or (b) thinking that in an impending divorce, you may be paying alimony, your time has almost completely run out to make your best deal. Visit a highly experienced divorce attorney as quickly as possible to understand current alimony tax law ramifications before they run out on December 31, 2018.
Congress passed a new tax act last year, and one major component is that alimony is no longer tax deductible to the spouse paying it. It is also no longer taxable to the person receiving it, which complicates matters even more.
If You Are Already Paying Alimony
If you are presently paying alimony pursuant to either (a) a Court Order or (b) a written agreement signed by both spouses, then your alimony payments will continue to be tax deductible. There is, of course, a real question whether they will remain tax deductible if your alimony amount or duration is later modified after December 31, 2018.
If You Are Not Yet Paying Alimony
Congress, in its continued assault upon marriage, has crafted a policy where the spouse potentially paying alimony is better off separating now and cutting a deal to pay alimony to create a major tax break before the end of this year. At the same time, Congress has created the counter-tension of the spouse potentially receiving alimony, who desperately will want to hold off in any divorce proceeding until January 1, 2019, so that the alimony received is no longer taxable.
What Can You Do Now
It depends on which spouse you are, the payer or recipient. The payer of alimony needs to find the proper incentive to get a deal done before the end of this year, if it includes payment of alimony, to secure the tax benefit.
If you are the potential recipient of alimony, the paying spouse should make it worth your financial while in exchange for having to pay taxes on alimony. That is a major power dynamic shift in favor of the potential recipient of alimony.
Consult A Divorce Attorney Now
This is a very complex financial issue, and one that requires experienced divorce counsel to assist you, regardless of which end of this issue you are on.
Waiting could be devastating to the potential payer, while waiting is exactly what the recipient will want. Divorce attorneys are creative and can involve financial experts who are also skilled in this area to balance each spouse’s needs and find a palatable solution for everyone.
Here is one last thought: people often hear that the best settlement is the one where everyone walks away unhappy. That is hogwash. The best settlement is the one where both spouses walk away being able to move forward.