By Trey Yates
Have you or your spouse been dragging your feet in finalizing your divorce? Well, you both may have a good reason to sign on the dotted line by year’s end.
A significant change to federal income tax law surrounding alimony or spousal maintenance will go into effect next year. This new rule will wipe out a 75-year-old tax deduction dealing with alimony payments, starting Jan. 1, 2019.
You would be wise to discuss this new rule immediately with your divorce attorney, because it may require that you and your spouse be officially divorced by the end of 2018, before the tax law goes into effect.
It all depends on the specifics of your case and how changes in that law might affect you.
Starting in 2019, the change in the tax law shifts the tax burden to the higher earner. Under the “new tax rule,” the spouse paying alimony will no longer be able to deduct the support from his or her gross income. For the alimony recipient, the payments will be tax-free.
Many experts such as myself forecast this change will likely have far-reaching and unexpected ramifications. I anticipate this will make settlement negotiations harder because the spouse with the alimony obligation or option will be motivated to pay less to offset the new, increased tax burden.
The bottom line here is a divorce with an alimony component in 2018 will be easier to resolve now than with the new tax law in 2019, because the outgoing tax law leaves more money to go around.
This change is another reminder that when it comes to divorce, what you don’t know can hurt you! And if you aren’t familiar with divorce law, and other areas of law relevant to your case, your family could be impacted financially and otherwise for the rest of your lives!
I recommend securing the assistance of an experienced divorce lawyer who is Board Certified by the Texas Board of Legal Specialization in Family Law. Attorneys with this certification offer relevant, proven experience, and have been thoroughly tested for special competence in a specific field of law.