New Tax Rules on Alimony: Act before December 31st!
It’s finally December and the end of 2018 is soon approaching. With it being the end of the year, there is something changing in the world of divorce law: tax rules on alimony. December 31st, 2018 is the date by when couples need their divorce terms settled before any alimony tax rules change, as a result of the Tax Cuts and Jobs Act that was passed last year.
What are the rules now, and how will they change? Read further for our breakdown:
Current: Alimony Payments are Tax Deductible
- under the current system, any alimony payments are tax-deductible for the one that pays, and taxable income for the one that receives the payment.
2019: Alimony Payments No Longer Tax Deductible
- it’s estimated that the IRS will receive a $6.9 billion increase over the next ten years, due to this change.
- it’s a big step that gets rid of a requirement that had been in place for over 70 years.
In order for the payments to still be tax-deductible, you must have a signed agreement by December 31st, 2018. If you have it signed a day later, the new laws take effect and there are no exceptions.
This could raise several problems, for those that don’t follow the rules and think they still have extra time. If you’re financially vulnerable from the divorce process, the new change could work even less in your favor post-split.
As a last step, we want to give a theoretical breakdown of the financial amounts, before and after the change, via “Analyze My Divorce Settlement”, from Lorie Konish of CNBC Personal Finance:
Have further questions or need help speeding along the process? We suggest hiring a divorce law attorney who specializes in the local laws in addition to federal and state laws. At Southern Oaks, Lafayette family law attorney Taylor Fontenot specializes in divorce law and believes his role is to protect your rights and interests while simultaneously working with everyone involved in order to minimize collateral damage and resolve disputes timely and efficiently. Give us a call today.