For 70 years, spousal support, also known as alimony, was taxed a certain way. For the payee, it was taxable income. For the payor, it was deductible. As of January 1st, 2019, all of that has changed thanks to the Tax Cuts and Jobs Act. Spousal support payments are no longer deductible for the payor, nor are they taxable income for the payee.
A Big Impact On Divorce Cases
According to an article from CNBC, the change caused a rush to finalize divorces before the start of the new year. Some have argued that the change will make divorce harder. The ability to deduct alimony payments represented a potentially substantial amount of money that will no longer be in play without the deduction.
However, the article points out that there are other tax changes that should be taken into account when going through the divorce process, and these changes could be beneficial in some circumstances. For example, the cap on mortgage interest deductions has been lowered, which may need to be considered when ascertaining what will be done with the family home. Additionally, the child tax credit has increased, which may need to be taken into account when making child custody arrangements.
Ultimately, the changes to the tax rules do not necessarily mean that divorce is any harder than it was previously. Hubert Gilroy and Petra Gross of [nap_names id=”FIRM-NAME-1″] understand the tax ramifications associated with spousal support and will take them account when offering guidance during the divorce process.
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