President Trump signed an extensive tax overhaul bill late last year that will have significant effects on the almost 250,000 Americans that receive alimony each year. These new tax provisions will apply to any divorce or separation agreements filed after December 31, 2018.
Goodbye Alimony Deductions
One of the most dramatic tax changes effecting divorced couples will be the elimination of the tax deduction for alimony payments. For the last seventy-five years, a spouse who paid alimony as part of a divorce or separation agreement could deduct those payments on their annual tax return.
Proponents of the tax change argued that the deduction gave an unfair tax advantage to divorced couples, who would pay less in taxes than married couples with the same income. With the repeal of this deduction, the government could add almost $7 billion in new tax revenue over the next ten years. Given the $1.5 trillion tax cut, that amount adds up to less than a half percent.
Tax Obligations for a Spouse Receiving Alimony
Another significant change is that for the 2019 tax year, a spouse who receives alimony will no longer need to pay taxes on those payments. Previously, spouses were taxed for alimony payments they received. With these new changes, alimony is now treated the same way as child support for tax purposes. Child support is not tax deductible for the payer and it is not taxed to the recipient.
Many divorce lawyers are concerned that these changes will make divorce settlement negotiations more difficult for all parties. With the elimination of tax deductions, there may be fewer incentives to pay alimony, which could lead to an increase in cash settlements and decrease in spousal support. Moreover, couples will face the real possibility that more of their money will be going to pay taxes.
For couples who struggle to divide assets in a way that would afford each spouse the ability to live separately, this could become a major hurdle in filing for divorce or separation.
Towson Alimony Lawyers at Huesman, Jones & Miles, LLC Handle All Your Alimony Issues in Maryland
If you are considering filing for divorce in Maryland and need help to obtain spousal support, the Towson alimony lawyers at Huesman, Jones & Miles, LLC are here to help. Our experienced legal team can assist you in all aspects of your divorce proceedings including the division of marital assets, alimony, child support, child custody and post-divorce modification issues. To schedule your free confidential consultation, submit an online inquiry form or call us today at 443-589-0150.
Our offices are conveniently located in Towson and Hunt Valley, Maryland to serve clients throughout the state including the communities of Cockeysville, Lutherville Timonium, Upper Falls, Phoenix, Riderwood, Sparks Glencoe, Brooklandville, Butler, Stevenson, Glyndon, Monkton, Reisterstown, Pikesville, Owings Mills, Parkville, Boring, Glen Arm, Baldwin, Upperco, and Hyde.