You make more money than your ex-spouse. As such, you were ordered to pay alimony when the two of you got divorced. You pay $2,500 per month.
One big question you have is simple: Who pays the taxes? Do you have to pay the taxes on that money first, before sending it to your ex — meaning alimony really costs you more than $2,500 — or does your ex have to pay the taxes as if your alimony payments are his or her income?
It’s a good question to ask, especially since the federal alimony tax is about to change dramatically. This is all due to the Tax Cuts and Jobs Act.
For over seven decades, you would have been allowed to write off the alimony payments as a tax deduction. Your ex needed to pay taxes as if the alimony was simply income.
That changes on Jan. 1, 2019. The new federal law flips the obligation. If you get divorced after that date, you will no longer be able to deduct your payments. You still have to pay the taxes on that money, even though you’re sending it to your ex. On the other side, your ex has to pay nothing in taxes, as the alimony payments do not count for income tax purposes.
It is worth noting that your payments will stay the same if you are already divorced. They get grandfathered in. The change only applies to new divorces on or after Jan. 1.
This law has not taken effect yet, but the coming change shows just how important it is to follow legal updates and to understand how they may impact your rights and obligations during a divorce.