At the end of 2017, the government passed the Tax Cuts and Jobs Act. This is more commonly known as the major tax overhaul that has taken over the headlines in recent weeks. This is a very expansive bill that makes changes in taxes for many topics, one of which is alimony. There are a few changes coming to the way alimony is taxed for couples that signed divorce agreements on or after January 1, 2018.
Before 2018, the former spouse who made alimony payments was able to use it as a tax deduction. In addition, the law used to require the alimony recipient to include the payments they receive as part of their income.
Now, any divorce decrees that are signed and have an alimony obligation will have different tax consequences for both the payor and the recipient. The payor will be taxed on the money they are obligated to pay to their former spouse, as it is included in their income.
It is important for couples signing divorce and separation agreements from here on out to understand the tax obligations they have if spousal support is a factor in their situation. Of course, alimony is not necessary in every divorce. It may be beneficial to consult with an experienced divorce attorney to help you determine how these changes may impact you and your divorce.
For strong legal representation from an experienced divorce or family law attorney, contact Underwood & Micklin and we would be happy to schedule a consultation to discuss your matter.