The new tax law was signed in late December 2017 and will affect taxpayers both positively and negatively in 2018. For those who go through a divorce in the coming year, one change is worth noting before filing taxes.
The Tax Cuts and Jobs Act eliminates many itemized deductions, one of which is alimony payments. For those paying alimony, these funds can no longer be deducted from taxes. However, those receiving alimony payments will be able to deduct the income.
The Revenue Tax Act of 1942 previously established that those paying alimony could deduct the income from their taxes, while those receiving it could not. That law overruled Gould v. Gould, a 1917 Supreme Court case that ruled alimony was not taxable income.
Preparing 2018 taxes after a divorce
The change begins in 2019 for divorces signed this year, so any divorces in 2017 or earlier are not affected and will continue to be treated the same as they’ve always been under tax law. Couples who divorce this year will have to take the new tax law into account.
As you are preparing for divorce and the possibility of receiving or paying alimony, working with a professional who understands tax law will help you determine the best way to adjust your taxes to not be hit with a burden in 2019.
You can discuss your tax options with a family law attorney who has the legal and financial experience to help divorcing individuals minimize tax consequences. They can gain a full understanding of your unique situation and how it applies to alimony payment changes to outline a specific plan that addresses your needs to be self sufficient after a divorce.