The new tax plan signed into law by President Trump in late December 2017 has many new changes and provisions, including one which will greatly affect divorcing spouses when it comes to spousal support, or alimony, payments.
Under current IRS law, a party paying spousal support can deduct those payments, effectively lowering the overall payments made in accordance with his or her tax bracket. The party receiving spousal support must count the support as income and pay taxes on the support received. This has been the practice for more than fifty years.
Under the new plan, which is effective January 1, 2019, the party paying spousal support can no longer deduct the payments, and the party receiving support no longer has to claim the money as income for tax purposes.
This is a significant shift in policy – one that may cause agreed spousal support payment amounts to experience a downward shift as paying spouses will have to pay higher taxes, and therefore have less money to make actual cash payments each month. It will be important for all couples contemplating divorce to consider this issue before signing any property settlement agreements, and for all counsel to argue the point before judges in a contested hearing or trial.
If you need assistance with or have questions regarding spousal support or alimony, please feel free to contact the family law attorneys at Winslow & McCurry at 804-423-1382 to set up an initial consultation to discuss how this affects you personally.
