Does Alimony Affect Your Taxes?
Alimony is not an issue that arises in every divorce, but when it does, it can significantly impact the financial futures of both ex-spouses following the divorce. Whether you are seeking alimony or might have to pay alimony, you might have many questions, including how it might affect your taxes. The following is some general information, and you should not delay in speaking with a Daytona Beach alimony lawyer at The Law Office of Jeffrey A. Klein P.A. who can provide guidance regarding your specific situation.
Alimony, which is often referred to as spousal support or maintenance, is financial support paid from one ex-spouse to the other. Alimony might come in the form of a lump sum or monthly payments for a specified period of time. Not surprisingly, this is often a hotly contested issue, as receiving or paying alimony can dictate your financial situation.
Alimony and Taxes
For decades, tax laws looked favorably on taxpayers who have to pay alimony under court orders. The payer could deduct payments from their taxes, while recipients reported the alimony as taxable income. This was helpful because recipients, who would generally be in a much lower bracket, would be the party responsible for paying taxes on those funds at a presumably lower rate.
However, this all changed with the Tax Cuts and Jobs Act, which went into effect at the start of 2019. Now, the following is true for any alimony orders issued after December 31, 2018:
- There are no longer deductions available for those paying alimony
- Alimony recipients no longer have to report these funds as taxable income
This means that the paying spouse will pay taxes on income received that they use for alimony payments, and recipients will have no tax obligations for receiving alimony. Note that the same rules do not apply to child support payments.
If you have an alimony order that was issued in 2018 or before, the old rules apply to your alimony. However, if you or your ex-spouse obtained an alimony modification after January 1, 2019 - or obtain a modification in the future - the new tax rules will apply.
Impact on Alimony Determinations
The current tax rules regarding alimony give spouses another reason to fight against having to pay support to their ex-spouses following a divorce. This means that many alimony requests will be aggressively challenged, possibly leading to more litigation over the issue of alimony.
If you might be subject to an alimony order, it is important to understand all of the implications of that order - including tax liability. You want an attorney who will fully explain the issue and protect your rights against unfair alimony orders. On the other hand, if your spouse is fighting against alimony you deserve, you want a lawyer who will protect your right to financial support if you qualify.
Consult with a Daytona Beach Alimony Attorney
The Law Office of Jeffrey A. Klein has represented clients on both sides of alimony disputes. If you believe your Daytona Beach divorce will involve alimony, don’t hesitate to call 386-252-3061 or contact us online for more information.
We are always readily available to answer your questions.
We communicate directly with our clients, always promptly returning calls.
We are a husband and wife team that genuinely cares about our clients.