Each year, there are approximately 800,000 divorces finalized across the United States. That number is anticipated to rise in 2018 as divorcing couples rush to meet the December 31, 2018, deadline to preserve the current alimony taxation system. This is especially the case for divorcing couples with substantial assets who are already part of a higher tax bracket. Many of these spouses have expressed concerns about the change. Under the current system, the former spouse who makes support payments can deduct a portion of those funds on their income taxes each year.
Starting with divorces filed in 2019, however, paying alimony will no longer be tax deductible. The taxation will switch for spousal support recipients as well. Right now, people who receive alimony pay taxes on the funds. After the end of 2018, alimony recipients will no longer pay taxes on the support received. There’s no clear benefit for either party, however; overall spousal support award amounts are expected to go down following the changes.
For people who are thinking about divorce but are concerned about the many financial impacts of the end of a marriage, a family law attorney can provide counsel and representation. A lawyer could offer advice on matters of taxation as well as related divorce issues such as child custody and property division.