Changes to Spousal Support Taxes Arrive This New Year

With the end of 2018 quickly approaching, many Americans are beginning to catch wind of new tax code changes that arrive on the first of the year. While many of these changes, including changes to tax brackets and tax numbers, may be beyond the realm of family law, one importing change arriving on New Year’s Day has a direct impact on divorced spouses. That means changes to how spousal support will be taxed.

To help you learn a little more about the new tax code changes and the impact on spousal support, our legal team at DiPietro Law Group, PLLC has answered a few common questions being asked:

• What is the tax change about? – Come January 1, 2019, the way spousal support will be taxed by the federal government will change. Currently, the party who pays spousal support, also called alimony or maintenance, has the ability to claim those payments as a tax deduction. Consequently, it is the recipient spouse who pays the taxes for those payments as income. On January 1st, that treatment will change so that support payments will not be deductible, and recipients will not have their support taxed as income.
• What does that mean for the coming tax filings? – Although no one has filed their 2018 tax return just yet, tax season is also fast approaching. While a professional tax advisor can help you better understand how taxes will work in accordance to your unique situation, bear in mind that those 2018 filings will be based on the old tax law arrangement for the purposes of spousal support (i.e. deductions for payers, and income tax for recipients). The new tax law information will be necessary when 2019 ends.
• What if my divorce is pending? – If you have already finalized a divorce, the way your spousal support payments will be taxed will remain the same. The changes only apply to divorces finalized in the New Year. If your divorce is still pending and near finalization, you may want to consider how the tax changes may impact your case and any spousal support awards. If your divorce has just begun or you are still in the early stages of considering divorce, don’t rush into an early settlement simply because you think you’ll benefit from the tax change. Doing so may prevent you from fully addressing other issues in your case, including matters of property division, child custody, and more.
• What if I want to modify spousal support? – There are many cases where divorced spouses can seek a modification of existing divorce orders, including those related to spousal support. If you are seeking a modification, be aware you will likely need to justify those changes if they are not mutually agreed upon by either party, such as by proving a substantial change in financial circumstances (job loss, disability, etc.). Additionally, you should understand that any spousal support modifications made before the end of the year will preserve the current tax treatment, and any modifications made on January 1st or later will mean spousal support payments are going to be subject to the new laws.

Guiding Clients Through All Aspects of the Divorce Process

The intricacies of the new tax code changes and how they impact spousal support are a prime example of the many granular issues that exist in divorce cases. While taxes are important to consider, you should be careful of making any rash decisions simply because you believe you will “benefit” by finalizing a case now or after the first of the year, especially without a skilled and knowledgeable lawyer. More importantly, it’s important to remember divorce is filled with many other important issues to address – from dividing assets, debts, real estate, and retirement accounts to addressing issues like child custody and visitation, temporary orders, and other challenges that may arise along the way, including those involving hidden assets, disputes, and litigation.

Ultimately, you can position yourself to address all the unique issues in your divorce, and benefit from experienced guidance, by working with trusted attorneys who have the knowledge, training, and resources to help. At DiPietro Law Group, PLLC, our attorneys have decades of collective experience in divorce and family law, as well as the challenging and unexpected difficulties that can crop up in those cases. If you have questions about a potential divorce case or another family law matter, we’re here to discuss them personally with you during an initial consultation.