The federal tax code is undergoing changes come 2019, and these changes may affect financial aspects of divorce for couples divorcing after the end of 2018. Alimony is one area set to change when the new tax code goes into effect.
If facing a divorce, you should know how these new regulations in the tax code may possibly affect your settlement from a financial perspective. By understanding the ramifications of these changes, you can make informed decisions about how to proceed in your divorce.
Changes in tax code regarding alimony
A major change on the horizon involves how taxpayers deduct alimony payments. For three-quarters of a century now, the ex-spouse paying alimony has deducted that payment from taxes, and the person who received the alimony payment has had to pay taxes on it. The new tax code effectively abolishes this, so payers no longer deduct the payment from their taxes and recipients no longer pay taxes on alimony.
Practical considerations for divorce
With 2018 quickly coming to a close, it’s crucial to consider these changes if you are currently going through a divorce that will involve spousal support, or if you are on the verge of divorce.
Some couples, for example, have decided that they simply cannot afford to get a divorce because of the changes to the tax code, but that is not a workable solution in the long-term. A more practical option is to seek professional counsel on how the new regulations could apply in your particular case, then make a strategic plan about how best proceed.
Do not let the new tax code intimidate you regarding your impending divorce. If you seek to understand the implications these new regulations have on your situation, you can have peace of mind as well as a sound financial strategy moving forward.