For those in the process of divorce right now, you may not be able to take advantage of certain tax deductions which have been around since the 1940s. A new federal tax law will affect spousal maintenance (also called spousal support or alimony for those finalizing divorces in 2019 and beyond.
Under current laws, spousal maintenance is deductible on taxes, and is considered income to the spouse who receives it. Those whose divorce was finalized before 2019 will continue to operate under the previous law.
Let’s take a dive into the law and what it might mean for you. And when you’re ready for legal advice, contact Jennifer Nixon.
New Tax Law & Spousal Maintenance
Whether you’re the person receiving spousal maintenance or the one paying alimony, the new tax law will affect you. Spousal maintenance can no longer be used as a deduction and doesn’t need to be reported as income. Any divorce finalized on or after Jan. 1, 2019 will be affected.
The new tax law is definitely something to consider when deciding what amount of spousal maintenance is right for you and your spouse. Starting in 2019, there will be no deduction allowed so the spouse paying may be left in a higher tax bracket. Similarly, the recipient of spousal maintenance doesn’t need to report it as income, possibly allowing them to maintain a lower tax bracket. Have a frank discussion with your divorce lawyer or collaborative divorce team about how the new law might affect you.
If spousal maintenance is a consideration in your case, it’s important to be protected with the most up-to-date information. Work with a lawyer who’s aware of the stakes.
Contact Jennifer Nixon to learn more about how this new tax law could affect your bottom line.