In December 2017, U.S. President Donald Trump signed the Tax Cuts and Jobs Act, or TCJA, into law. One of the provisions tucked into this package significantly impacts the future of alimony—a type of maintenance payment provided by a husband or wife to their ex-spouse following a divorce. The TCJA will alter the tax treatment of alimony payments for any agreements or court orders made as of January 1, 2019. Find out how. 

How Alimony Tax Law Will Change

If you are already paying or receiving alimony based on an existing agreement or court order, you won’t be affected. For those who do not currently have a formal agreement in place by year’s end, however, the new law will apply. 

Previously, the individual paying alimony could file an above-the-line tax deduction. This means all such payments could be subtracted from his or her gross income. The person receiving the payments had to report them as taxable income.

In the future, parties paying alimony cannot deduct these payments. Additionally, such financial provision will no longer be considered taxable income. 

What This Means for Future Alimony Arrangements

The changes effected by the TCJA might seem like a “win” for individuals receiving alimony. However, it likely means that payments will be much smaller in the future. 

In the past, the spouse paying alimony would often agree to larger packages because they knew these would be tax deductible. Without this motivation, there is little incentive to provide financially for an ex-spouse. 

For this reason, many couples in the midst of separating are racing to resolve their agreements before January 1, 2019. If you are in the process of divorcing, it might be in your best interest to settle the issue before year’s end.

In need of a divorce lawyer in Toccoa, GA? Look to NMS Law Firm. Attorney Nina M. Svoren has more than 25 years of experience and is known for her in-depth knowledge of family law matters, including alimony arrangements. She will honestly assess your situation and give you the guidance you need to get the best possible outcome. Learn more about experience and credentials online. For an appointment, call (706) 282-4696. 

Disclaimer: Please note the attorneys of NMS Law Firm are not tax experts. If you are in need of tax advice or services, contact a tax professional.