An upcoming change in the tax law will eliminate a tax break surrounding alimony payments made from one ex-spouse to another. The law, which will go in to effect in 2019, will prohibit divorcees from deducting alimony payments on their taxes. If your divorce or modification of a divorce is signed before the end of the year, alimony payments will still qualify as a deduction. The new law has huge financial implications for couples where one person earns much more than the other.
Currently, the law allows for the deduction of alimony payments from a person’s income before they calculate what they owe in taxes. This is a significant tax break for those paying alimony and often a bargaining chip for attorneys who represent the lower income earning spouse. The receiving spouse, who may be in a lower tax bracket, would pay taxes on the amount at a lower percentage.
Unallocated support payments, which could be described as a mixture between child support and alimony, will also lose their deductibility in 2019. Child support payments under both the old and the new law are not deductible.
Despite the new law, there are still ways to work around the change and provide the lower earning spouse with support. Spouses may choose to instead accept larger shares of marital property, such as retirement accounts or real estate, in order to maximize the tax advantage and waive alimony payments.
For more information on how the new tax law may affect you or to schedule a consultation with our experienced family law attorneys, please call Levine-Piro Law, P.C. at 978-637-2048 or email us at email@example.com.