Upcoming Changes in Alimony and Taxation

Under the new Tax Cuts and Jobs Act (TCJA), alimony will no longer be tax-deductible effective January 2019.  Currently, alimony or spousal support payments are deductible to the payer and taxable to the payee. This applies to all current divorce or support orders and any that are signed through December 31, 2018.  Effective January 1, 2019, in all new orders entered, alimony is not deductible to the payer or taxable to the payee.  The TCJA also specifically provides that the tax treatment of a prior alimony payment may be modified to take the new tax treatment into account, but only if the parties agree.  Modifications must specifically state that the TCJA tax treatment of alimony payments now applies.

With this deadline approaching, you may want to consider either proceeding with your divorce before the end of the year, or waiting until 2019, depending on how the taxation affects you. It may also be time for you to consider a modification of a prior order. Contact our office for a consultation if you think this applies to you.

Other resources on this issue:

https://www.marketwatch.com/story/new-tax-law-eliminates-alimony-deductions-but-not-for-everybody-2018-01-23

https://www.cpapracticeadvisor.com/news/12415051/divorce-what-tax-reform-means-for-alimony-deduction

https://www.kiplinger.com/article/taxes/T055-C005-S001-under-the-new-tax-law-is-my-alimony-tax-free.html