For years, alimony negotiations relied on two important tax provisions to provide balance and boundaries to the process. Now, under the tax cut bill recently passed in congress, these balancing measures are no longer available.
These changes could significantly alter the way couples must address alimony during divorce. They could possibly keep them from being able to afford divorce at all.
Those who pay alimony no longer have the ability to deduct these support payments come tax time, which for many years was an important bargaining chip for the receiving party and source of financial relief for the paying party. Likewise, the paying party no longer has to claim alimony as income, further complicating negotiations.
Not only must the paying party bear the financial obligation of support without any tax benefits, the receiving party may now receive alimony more or less tax-free.
This clearly stands to complicate an already difficult process. It may even keep some spouses who cannot afford to pay alimony without the old deductions trapped in marriages they cannot afford to leave.
It is crucial for those considering divorce to understand how the law may create these imbalances and the means they may have to work around the new law to achieve the divorce they need.
If you and your spouse face divorce and you anticipate alimony factoring into the settlement, you must understand all the laws that affect this process at both a state and federal level.
Careful, personal guidance from an experienced divorce attorney can help you identify your divorce priorities and develop a strong strategy to keep your rights secure as you work towards a fair, responsible resolution.
Source: CNBC.com, “Alimony tax changes may scorch divorcing couples,” Feb. 20, 2018