Divorce is rarely easy, especially when it involves ongoing spousal support. In many cases, individuals who divorce would prefer to not engage with each other after the divorce finalizes, but spousal support is an important part of the American divorce system, especially when one spouse enjoys a significantly higher income than the other.
Until recently, the tax law allowed individuals who pay support to an ex-spouse to deduct these payments from their tax returns and counted these payments as part of the receiving individual's gross income. However, the new tax law significantly changes the way that spousal support gets taxed.
Spouses who finalize their divorces after Dec. 31, 2018, will fall under the new rules dictating that parties paying spousal support may no longer deduct support payments on their tax returns, and must instead claim these payments as part of their income. Practically speaking, this allows the government to tax these payments at a higher rate, because many individuals who pay spousal support are in higher tax brackets than those who receive support.
In some cases, these changes to the law may affect both the paying party and the receiving party. Paying parties now bearing a greater tax burden may negotiate lower payments to balance out the effects of the new law between divorcing spouses.
If you and your spouse anticipate spousal support figuring into your divorce, or even if you are unsure, it is wise to reach out to an experienced attorney to assess your divorce in light of the new tax laws. In some cases, spousal support may not be the only issue in divorce that these new laws affect. With professional guidance, you can set the tone for your divorce and negotiate truly fair agreements as you work towards beginning a new season of life.
Source: CNBC.com, "Here are five breaks you’ll miss the most in the tax bill," Darla Mercado, Dec. 19, 2017