Here’s the real question: Do the new tax laws affecting alimony negatively affect you?
On January 1, 2019, alimony will no longer be taxable to the recipient. Instead, it will be treated much like child support.
Alimony will also no longer be tax deductible to the payor. That’s a huge blow to the payor, who is now going to first be taxed on the earnings but no longer receive any deduction for paying alimony.
Does any of this really matter?
That was the subject of a statewide seminar hosted by Harry Siegel of SIEGELLAW on November 2. During the seminar, five members of the judiciary, a highly experienced divorce mediator, and a top forensic accountant discussed the implications these changes to alimony.
So, what is the answer?
As with all things, “it depends.”
The better answer? With the counsel of a tax professional and an experienced attorney with a financial background, there are many ways to offset the effects of the payment of alimony ordered or agreed upon in 2019.
Highly experienced divorce attorneys have always guided their clients – directly or through financial experts – across the complex financial terrain of divorce. It can get complicated, and so much must be factored in for the best result. Of course, sometimes, the best result is the “least-worst” result.
Who knows the least about the new tax ramifications of alimony upon divorce? Right now, it is the judges hearing your case. They will solely rely on the attorneys and expert witnesses they hear from to determine the most equitable approach. Perhaps that means reducing an alimony award to consider the taxes the payor will have to absorb. Perhaps there are other areas of deductions to offset alimony. Don’t forget, there are often major issues of college financial aid that become intertwined with alimony and divorce.
Finally, alimony can be creative. More importantly, payments between spouses can be creative. Maybe in a certain case, a disproportionate share of the family’s assets totally offsets the need for alimony.
Remember: seeking assistance from an experienced divorce attorney should always be your first step in moving forward with your life. SIEGELLAW can help. Give us a call at 410-792-2300 or fill out the form on this page to request additional information.